In the first episodes of Money Minute we got the 60-second low down on credit, what it is and where to check your credit. Today, we talk why. Why all this talk about credit anyway and why should you care?
You hear A LOT about credit, if only from non-stop commercials about checking your credit – but you may not realize why credit actually matters. And trust me, it matters.
Your credit score, determined by your credit history is a major consideration when it comes to being approved for any king of borrowing – a loan, a mortgage, a credit card. Not only does your credit score determine whether you’re approved, it also determines how much you pay to borrow that money. That is, your interest rate.
If your credit history indicates you’re an unreliable borrower with a low credit score, not only might you not be approved for a loan or mortgage or credit card, if you are, you’ll probably have to pay a much higher interest rate.
The better your credit score the better rates and terms you’ll qualify for when borrowing money. As such, improving your credit is one of the effective things you can do to save money in the long-run.
According to one analysis from MSN money,
If you have a credit score of 650 and get a 30-year, $400,000 mortgage, you could pay over $70,000 more in interest than someone with a 750 credit score with the same mortgage.
In other words, bad credit can cost you, but good credit can save you big time.
So we know that credit plays a major role in whether or not we’re approved for a loan or a mortgage or a credit card – and we know our creditworthiness determines how favorable the rates and terms we get on those loans are.
And while that makes credit pretty important in and of itself, there are many more instances in which credit matters. If you’re looking to rent an apartment for example, your credit is considered because it tells your landlord how likely you are to pay your rent on time and in full each month. It can also affect how much you pay for insurance or whether or not you’re approved for a cell phone plan.
Essentially, your credit is your reliability distilled down to a single number. How well it measures your actual reliability, who knows. But because it’s an accessible tool lenders, service providers, landlords and others, it’s often what gets used, so it’s best to keep your credit in check.
I’ve put together a FREE Credit Check Checklist to walk you through a complete review of each of your three credit reports.
Enter your name and email to get the step-by-step credit check guide delivered directly to your inbox!
Next time on Money Minute we wrap up the credit conversation.
SUBSCRIBE to the channel on YouTube to get all the episodes when they go live.
If there are any $$$ questions you’d like answered in 60 seconds or less, let me know in the comments!