Why is it important to know your credit score?

Why is it important to know your credit score?

A credit score can be regarded as a summary of the data in your credit report. Represented in numerical form, it is used by financiers to guide their decisions.  

Credit bureaus use this data pertaining to how well you have repaid your debts, how long you had credit for, any new applications as well as the debt you have accumulated to group borrowers into specific levels, which indicate how much risk is associated with them. 

It is important to know your credit score because it indicates your status. If you want to apply for a home loan, it has to be near impeccable, so doing your research will benefit you. 

A poor score may hinder you from obtaining more finance, so you’ll want to be on top of things by finding ways to better your score. 

For lenders it means that they can rely on applicants they are granting credit to and for the latter, it means that they are more likely to get the best rates. 

Borrowers are entitled to one free annual report. This ensures clarity about where they stand in terms of credit status, enabling them to make excellent decisions financially. 

There may be errors at times, so by checking, this may give you the edge by being able to contact the creditors in question so they can fix the errors. 

When you know your credit score it also gives you a chance to improve upon it, in case you are looking to apply for additional credit. If you apply for car finance and are rejected, you should take an active interest in knowing why your application didn’t make the cut. Once you do know the reasoning behind the decision, changing some of your behaviours may lead to more favourable conditions.  

Categories: Financial tips