Risk? Simply put, banks and creditors need to know how likely you are to pay back the money you owe. The more likely you are to meet your obligations the lower percentage rate you will pay. If you have a low credit score instead of denying you a loan or a credit card banks will charge you a higher rate of interest. However, if your credit score is really low they won't risk doing business with you.
Why is Your Credit Score so important? Why do credit bureaus exist and why do they keep score of your credit usage and history? Here are three reasons that directly affect us all:
- Credit Cards - banks could not issue these without knowing their RISK
- Debit Cards - banks could not issue these without knowing their RISK
- Checks - stores could not accept checks without knowing their RISK
For mortgage or car loans your credit score makes a huge difference in what you pay every month. There is a fabulous chart at http://www.myfico.com/Default.aspx .
It gives you a real life example of what you will pay for a mortgage or car payment with your current credit score.
- A person with a credit score range of 760 to 850 will pay $750 dollars a month in principle and interest for a $150,000 mortgage.
- A person with a credit score range of 620 to 639 will pay $905 a month for the same $150,000 mortgage. This is a dramatic difference and can make the difference of living the American dream of owning a home or not.
Get smart. Clean up your credit score. You deserve to get ahead in this life. This is an important step in getting your life on track.
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