5 Reasons Why a Credit Score Matters

A credit score is a numerical representation of your creditworthiness, which essentially indicates how likely you are to repay borrowed money. It typically ranges from 300 to 850, with higher scores representing better creditworthiness.

Here are five reasons why a credit score matters: 

1. Loan Approval and Interest Rates

Lenders use your credit score to determine whether to approve your loan or credit application. A higher score often means you're more likely to be approved and might qualify for lower interest rates, saving you money over time.

2. Credit Cards

Your credit score can affect the types of credit cards you qualify for and the terms of those cards. Higher scores often lead to better rewards and lower interest rates on credit cards. For example, cards with higher credit score requirements often come with better rewards programs, cash back, travel perks, etc. 

3. Renting a Home

Landlords might check your credit score as part of the rental application process. A higher score can increase your chances of getting approved for a lease and might lead to lower security deposits.

4. Insurance Premiums

Some insurance companies use credit scores to help determine premiums for auto and homeowners insurance. A better credit score could lead to lower premiums.

5. Financial Opportunities

A good credit score can provide access to better financial products and opportunities, while a poor credit score might limit your options and increase costs.

Maintaining a good credit score generally involves paying your bills on time, keeping your credit card balances low, and managing your debt responsibly. Learn more about the factors that go into calculating a credit score here. 

Main Takeaway 

A credit score indicates to financial institutions how likely you are to repay borrowed money. Credit scores are important because they can impact your ability to have loans approved, rental applications approved, lower insurance premiums and lower interest rates. In general, a good credit score will provide you access to better financial opportunities. 

The views and opinions expressed in this blog are those of the writers, and do not necessarily reflect the views or positions of Heritage Federal Credit Union.