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Are Credit Scores Important? You Bet They Are!

It is really a rare to find a person who either does not have any debts or one who conducts all financial transactions in cash because he or she doesn’t want to have to make credit payments. But for the millions of others who need credit, having and maintaining good credit scores are necessary in order to become creditworthy and to stay financially healthy.

People who have applied for a car loan, a mortgage loan, or any other major loan might know that the lending companies seriously consider credit scores before approving loans or use those scores as a major part of the basis for determining a loan’s interest rate. The higher a person’s credit score, the more creditworthy he or she is in the eyes of the lender and the greater the chances are of getting a loan approved at attractive interest rates.

A person’s credit score can range from 300 to about 850; finding a person with a score of 800 and above is rare indeed. About 29 percent of the respondents of a survey fall in the 750 to 799 range while a whopping 30 million individuals have a credit score under 620, which, if translated into letter ratings, would be a C minus or even a D. These credit score numbers are derived through the use of a formula and the results are compared to financial data on other people; this comparison enables lenders and other creditors to determine how creditworthy a person is, or more specifically, how likely (or unlikely) he or she is to make payments on time. And it’s not only creditors who look at this personal credit information. Even landlords and employers consider the credit score when screening potential tenants or employees. And public utilities will consider your score if you’re applying for water or electricity connection.

Thus, having a high credit score is desirable; even if your credit rating is good, it can’t hurt to pull it up a few more points. Improving your personal credit rating is very achievable; but it will take a certain amount of self-discipline and financial savvy. Paying bills on time, using credit cards less often, getting credit counseling when needed, and avoiding bankruptcy are helpful ways to improve credit scores. It will take some patience and legwork, but the resulting higher score is well worth the efforts taken.