5 Reasons to Pay Attention to Credit
It may be hard to believe but some people don't care about their credit score. As a financial planner, I always tell people to pay attention to credit because it's your everything. It's your financial well-being, a representation that determines your worthiness, and at the same time it can have a positive or negative effect on several other aspects of your life.
In Canada we have two main credit bureaus: Equifax and Transunion. Your credit score is a number between 300 and 900 that represents an overall picture of our financial life at any given moment. It is determined based on a variety of factors including past payment history on utilities and credit products, outstanding balances versus the credit limit as well as bankruptcies and written off accounts. The information used to create your credit score can be found in your credit report.
According to the Office of Consumer Affairs "Your credit score is a judgment about your financial health, at a specific point in time. It indicates the risk you represent for lenders, compared with other consumers."
Here are five good reasons to pay attention to credit:
You want to rent an apartment
Before you apply for any type of service, from activating a cell phone to renting an apartment you will need to agree to a credit check. Companies want to know if you have a history of making payments on time and that can affect their decision to do business with you. Keeping your credit in good standing can help make this process easier.
Get approved for a mortgage
A mortgage is a big deal. It's probably the biggest purchase you'll ever make in your lifetime and it's also probably the most debt you'll ever be in. Although it's not impossible to get approved for a mortgage with a low credit score, it can be very expensive. Having an above average credit score can help you get approved for a mortgage and buy your first (or next) home. It can also save you hundreds of thousands of dollars in interest charges. That’s one of the best reasons to pay attention to credit.
Helps determine the rates on credit products
A good credit score can help you be approved or new credit cards, loans and lines of credit but it can also help determine the interest rate. A lower credit score means more risk to the lender and therefore a higher interest rate. If you want to receive the best rate possible you will need the best credit possible.
What about a new job?
Most employers run a credit check before making a job offer. This is especially true for any job that deals with money. I'm sure you don't want to lose out on a great career opportunity because of your poor credit. Pay attention to payment dates and keep outstanding balances low to ensure there's nothing bad to report.
Home and car insurance rates
A lot of people may not know that you can receive discounts on your home and auto insurance if you allow the insurance company to perform a credit check and if your credit is good. Making sure your credit is in good standing can help lower your insurance rates in a way that can save you hundreds of dollars.
Don’t neglect your credit. It influences more than you know. Over time, it can mean a better financial situation and more options.