What Can A Good Credit Score Do ?
First and foremost is the ability to get a lower interest rate on loans – this is by far the most rewarding benefit! If you show a lender your great credit score, they will know you are reliable and able to make on time payments. therefore, they will feel as though you are a low risk candidate and allow you to borrow without having to pay a lot of interest. If your credit is low, then they will not be so quick to give you a loan – but if they do then you will probably have a higher interest rate.
In many ways you are your credit score, and like it or not this is the only standardized way that lenders can judge your credit worthiness. The most unfortunate byproduct of this entire process is the fact that the highest interest loans are given to the people who are the least likely to pay them off; in short, a smaller loan with high interest often takes more time to pay off than does a larger loan with low interest.
Another reason for you to maintain a high credit score is for the ability to qualify for a no or low doc loan. These loans require less documentation of your income and assets than normal, since a higher credit score infers more responsibility. Once again, this is because of trust associated with higher credit scores. The higher your score, the less you have to actively document before a lender approved you.
Credit scoring enables faster lending decisions:
Mortgage originators now can even make house calls carrying laptops equipped with software that allows them to pre-qualify or pre-approve borrowers in minutes. Credit scores are a big part of a lender�s ability to make these quick credit decisions. This same technology is in play on those quick decision Internet web sites.
Credit scoring encourages fairer decisions:
Credit scores do not take into account gender, race, religion, marital status, or national origin, and, hopefully, screen out any subjective feelings based on these or other personal factors.
Credit mistake are less important:
Credit scoring mitigates the impact of old credit problems. According to FICO, scoring weighs all credit related information, good and bad, in constructing a score and allows persons with previous credit problems to put that history more quickly behind them.
Credit scoring makes more credit available:
Lenders who use credit scoring are likely to approve more loans. They can identify borrowers who, even with past problems, may perform well in the future. �The use of credit scores gives lenders confidence to offer credit to more people since they have a better understanding of the risk they are taking on.� (FairIssac�s web site.)
Scoring makes rates lower overall:
Automated credit programs make lending decisions more cost efficient and savings are passed on to consumers. Therefore, mortgage rates are lower (for example) in the U.S. than in Europe.
Quick Credit Score Maintenance:
Here are a few ways you can maintain good credit:
* Make all your payments on time. It sounds simple, but you can fall behind quickly and one missed payment can be enough to reduce your credit score substantially!
* Avoid closing old accounts and opening new ones. You want to show that you are stable if you can help it!
* Don’t spend over your budget. Spend only what you can, when you can so you don’t fall into credit card debt.
* Communitcate with your creditors. If you fall on hard times, tell them rather than just missing a payment.
