Why creditworthiness is so important to you? You may hear on how important is to maintain a good credit score. Do you know how it affects you?
We are living in a credit world where it is so convenient and easy to get credit and buy things on credits.
Unless you plan to use ONLY the cash to buy anything, you have to understand how credit score affects you and the important of keeping good credit history for a better credit application in the future.
Let’s explore the importance of creditworthiness for a person who may apply for a credit such as loan, credit card or mortgage along his/her life path.
Creditworthiness: Get a loan at the best interest rate
Lenders assess an applicant who applies for a loan based on the applicant’s credit history.
The past credit performance helps lenders to determine the risk they have to bare if they approve the loan.
Credit score is a figure used to measure the past credit performance of a person. The higher score the better a person in term of his/her credit worthiness.
Therefore, people with excellent score will be offered with the best interest rate when they apply for a loan.
If you plan to apply for a personal loan or mortgage, you have to make sure you have a good credit score in order to secure the best interest rate.
Creditworthiness: Apply credit card at the lowest APR
Generally, credit cards charge higher interest rate compared to other types of credits.
So, if you don’t make a full payment every time you receive your monthly statement, you will need to pay a lot more interest compared to other people who get the cards at lower rates.
Similar to the loan application, credit card companies offer the best APR (annual percentage rate) to people who have good creditworthiness.
Creditors will consider you as a low risk applicant if you have good credit score. The score is a figure that measures the creditworthiness of a person.
The high score is, the better the creditworthiness will be. Therefore, people with good credit score will be able to secure for the best APR when they apply for credit cards.
Creditworthiness: Secure a job
Don’t be surprised to know many employers will request your credit report when they review your job application.
This is particularly true for jobs in finance and money related fields.
Employers may reject your job application simply because of your poor credit history.
Employers may treat people who fail to manage their credit properly to be a person who does not have the ability to carry out the job that meets the company’s requirement.
That’s how creditworthiness has become an important indicator for employers in hiring new employees.
Creditworthiness: Rent a house
You may not be able to rend a house if you have poor credit history. Sound like ridiculous? No, it is true that landlords may review your credit report before deciding to rend a house to you.
The creditworthiness will determine how good you are as a tenant who will pay the rental on time.
Image: Can Social Media Activities Affect your Creditworthiness?