Is credit really as important as people say? The short answer to this question is a resounding yes! Credit, rather good credit, is a key aspect of many facets of life. Having good credit can make many avenues of your life much easier. Bad credit, on the other hand, may make things like buying a car or a home a bit more difficult.
Why is credit relevant?
Your credit reflects your reliability as a borrower. Every loan you take out, whether it’s for education or leisure, goes on your credit report. Credit reports also include information regarding monthly payment history, lifespan of the loan, public records, and past due payments in collections will show up on your credit report as well. While not as informative as a credit report, credit scores are also an indicator of how financially reliable you are.
More likely to be approved for a loan
Credit most commonly proves its importance when it’s time to borrow money. Whenever you complete a new loan application, financial institutions will run a credit check to go over your credit report and assess your financial situation. In the event that a lender finds your situation is less favorable (i.e. high amounts of debt, negligent payment history, etc.), they are more likely to deny your loan application or charge higher interest rates. Contrarily, good credit history paints a better picture to the lender. If they are able to see that you have successfully managed your finances in the past, they are more inclined to approve you for an additional loan.
Landlords use credit to decide if they will rent to you
Similar to loan applications, credit plays a key role when you are applying for rental applications. Just like financial institutions want to know that you can pay your monthly bill, landlords want to know that they can trust that you will pay your rent each month. The state of your credit can be the deciding factor in whether or not you’ll be approved for your next apartment rental application.
Bad credit can narrow your job search
Since we know that credit is indicative of your reliability as a borrower, many jobs have begun including a credit check as part of the employment process. Keeping your credit in tip top shape can show a future employer that you’re a responsible candidate. However, bad credit can send the opposite message leading the employer to believe that you may have poor money management skills or lack of prioritization, ultimately making your job search a little more difficult.