The Importance of Good Credit: Why You Need It

Society is depending more and more on using credit to make purchases and decisions. Nowadays, good credit is used for more than just getting a loan or credit card. A large number of businesses are making the case that you must have good credit before they provide products or services to you.

Residence

When it comes to a roof over your head, having good credit is important. Mortgage lenders want to assure that you won’t default on your mortgage. If you bad credit or no credit, the lender will consider it risky to give you a mortgage loan. The consequences could be a higher cost of borrowing or worse, a denial of the loan.

Don’t believe that because you aren’t on the market for a new home, that your credit won’t be called into question. Your credit is used for rental decisions as well. Landlords deem your lease as a loan. You are being loaned a place to live and the landlord wants to make sure you’ll pay back this loan. If you don’t have good credit, it is possible that you’ll be denied for an apartment.



Vehicle

If you don’t have cash to purchase a car outright, you’ll have to get a loan. Your credit not only affects whether or not you will be approved for a loan, but also the amount and interest rate of the loan. Usually, loan applicants with good credit will be approved for larger loan amounts with lower interest rates.

Employment

Numerous employers perform credit checks as a part of the hiring process. If you haven’t showed financial responsibility, a future employer might be hesitant to hire you. For example, the employer might think your level of debt is too high for the salary offered.

Entrepreneurship

A countless amount of people have dreams of starting their own business. Most business startups involve a sizable amount of cash that you might not have at the time. In that case, you’ll need to acquire a small business loan. Along with other things, you’ll need to have good credit to qualify for the business loan.

Utility Services

It might be somewhat shocking to discover that your credit is needed to establish utility service. Your electric company argues that you’re borrowing one month of electric service. So, before turning on your electricity, the company will take a look to see if you have good credit. This applies to most utility services including cable, telephone, water, and even cell phone.

Since your credit is determined by how you’ve paid (or not paid) you’re bills in the past, many businesses such as landlords, mortgage lenders, utility providers, and even employers, use your credit to predict your future financial responsibility. Anytime you need to borrow money, or even services, your credit is called into question. This is the reason maintaining good credit is so important.

Author: Blayke