How important is a credit score when purchasing property?

Your Credit Score Matters

How important is a credit score? Your credit score matters when asking for a loan. The higher it is, the better. Credit scores are used by lenders not only to assess a borrower's eligibility for a loan but also to set credit limits and interest rates. In summary, a higher credit score translates into more credit and cheaper interest rates. A good credit score is beneficial for borrowing purposes, but there are a number of other advantages as well.

The Significance of Your Credit Score

Your credit score is crucial for loan eligibility, which is the most common reason for its significance. There are more justifications, though, for raising your credit score. Let's examine this.

• Lenders Use Your Credit Score to Determine Your Ability to Repay the Loan

You might be wondering why your credit score matters so much to lenders. Consider this: Let's say you want to lend some extra money and get a return on it. A prospective customer approaches you with a $10,000 loan request and a credit score of 550. If this person's score is less than 600, it could be because of unpaid bills, missing or delayed payments, or both. With this client, would you feel comfortable taking a $10,000 risk?

On the other hand, how would you feel about your chances if you lent $15,000 to a person who had a 720? It's likely that you would feel more at ease giving a larger loan to someone who has a history of making full and on-time payments than you would a smaller sum to someone who has the opposite record.

• Your Credit Score Can Help You Get Cheaper Insurance Quotes

The National Association of Insurance Commissioners states that credit has an impact on insurance costs as well. Your premium is set by the insurer based on credit-based insurance scores.

• In Order to Establish Utility Services in Your Name, Your Credit Score is Required

For those with strong credit, many utility companies—such as those that offer cable, phone, gas, electricity, or water—will not need cash deposits when you pay your bills. Furthermore, according to the Federal Trade Commission, utility companies will request information such as your Social Security number in order to examine your credit history, just like other creditors. Having a clean credit record may facilitate your access to services. A bad credit history may make things more difficult.

• It Takes Your Credit Score to Get a Cell Phone Contract

"Purchasing a cell phone is just one more reason to learn about your credit," according to Transunion Credit Bureau. Since most phone providers won't allow those with bad credit a contract, they may be forced to use pay-as-you-go cell phone plans.