» How to Repair a Poor Credit Profile Advices » The Importance of Bad Credit Repair

The Importance of Bad Credit Repair

In today's culture of consumers the use of credits has become very common. As a result credits have become an important factor for decisions pertaining to different purchases. Thus, a good credit has increased its importance to include not only the credit card and loan application, but even the extension of goods and services by businesses to their clients.

Why Is Repairing Bad Credit Important?

So you have checked your credit report and credit score and found out that your FICO is not high at all. Why is repairing your bad credit important?

As you already know lenders and creditors use your credit score to determine what risk you may pose to them. However, having a bad credit score and accordingly representing a higher risk to lenders does not necessarily mean that you will not be approved for credit (unless your credit is really bad). Instead, you will be offered credit at a much higher rate than the one someone with a better credit score would get.

For example, here is a sample table with the interest rates people with different credit scores would pay for a mortgage.

Credit Score Rate Monthly Payment
760-850 6.13 % $912
700-759 6.35 % $934
660-699 6.64 % $962
620-659 7.45 % $1,043
580-619 9.45 % $1,256
500-579 10.31 % $1,351

As you can see from this example, repairing your bad credit before you apply for a mortgage will save you a lot of money.

Credit Score Influences

Improving you credit score is important for more than just getting better mortgage rates. Your credit score has an influence on many other things:

  • Employment

    The hiring process in some companies includes the verification of the credit of the potential employee. This is done in order to get a view on how responsible with finances you are. Additionally, the level of debt may affect your employer's decision to hire you since the employer may decide that your salary will be inadequate for it.

  • Transportation

    Most of the people today tend to purchase cars by using loans, because they either lack the needed cash or are reluctant to use it. Thus, your success of receiving a loan for purchasing the needed car will be affected by your credit status. Additionally, if you do receive it, the amount you get and the interest you pay will be influenced by your credit status as well.

  • Utility Services

    The establishment of utility service is based on your credit. The reason for this is the service provider will argue that you get a service for one month in advance without paying. Thus, the company will check your credit status before it provides the utility service (e.g. telephone, electricity, water and etc.).

  • Entrepreneurship

    Any new business idea that you have will require external financing if you don't have the money needed. This external financing usually comes in the form of a business loan, which will be given if you have good credit.

As you can see your credit score affects many dimensions of your daily life. Thus, you need to build the appropriate knowledge to improve it if it is not good, so that you don't deprive yourself of the necessities you want.

Rate this article : Low
  • Currently 2.9/5 Stars
  • 1
  • 2
  • 3
  • 4
  • 5