A good credit history has a number of benefits. It can help you obtain a mortgage for your home, an auto loan and better interest rates on insurance and loans. Credit scores may even be used by employers when vetting job candidates.
The lower your credit score, the more interest you pay on loans and you may not even be able to get a loan at all. There are several very good reasons why you cannot afford to ignore your credit score.
Cash is not always your best option
You may have a good job with a regular salary and yet you haven’t built up a credit history. Your philosophy may be to use cash wherever possible and not have any debt.
It is only when you want to get a mobile phone plan or buy a car that you realize you cannot do so without a credit history. It isn’t impossible to live without a credit score, but in some cases, it can have unforeseen consequences.
Kikoff offers a solution to those who do not have a credit history with its free credit building solution. Approval for a small $12 credit-builder loan is easily obtained by opening an account and verifying your identity. You are not charged any fees or interest and you pay back $1 a month and build your credit history with one simple click.
What happens if you want to buy a house?
If you have a low credit score and you want to buy a house, you could be charged a higher interest rate for a mortgage.
Of course, if you have no credit score at all, you will not be able to get a mortgage as lenders will not be able to assess your reliability as a borrower. People with higher credit scores get better interest rates because a higher score indicates that you are at a lower risk of defaulting on a payment.
What happens if you want to take out a personal loan?
If you lose your job or get hit with a huge medical bill, having a good credit score can give you options, such as taking out a personal loan.
If you do not have access to affordable credit when you are in an emergency situation, you may have to resort to expensive credit. Car title loans and payday loans, for example, are expensive forms of credit you do not want to be forced to use.
Your credit score indicates whether you are a reliable payer or a risk for a personal loan. If your credit score is low, you may need to provide security for a loan and if it is low enough, you’re unlikely to get one at all. You may be able to get a secured loan but if you default on it, the lender claims the security.
You will not know if there are errors or if you are a victim of fraud
One other reason why you cannot afford to ignore your credit score is that the report may contain mistakes. It is not uncommon for errors to occur. One common mistake is that the score of a family member or even a stranger with a similar name is mistaken for yours.
It is also possible that someone could have committed identity fraud using your personal details and run up debts that appear on your credit report. You can fix the mistakes on your credit report by reporting them so they can be investigated. This can be a time-consuming process but it is important to do everything you can to improve your credit score.