Credit scores are the one number that everyone wants to know. A high score means you’re less likely to default on your loan or be rejected for a credit card, which will benefit you in the long run.
On the other hand, a low credit score can mean higher interest rates on mortgages and cars, as well as being denied loans. However, do you need to worry about your credit score? Read on to find out if it’s even worth looking at.
The importance of a credit score
Every time you apply for a loan or are attempting to get a credit card; you will be asked to provide your credit score. Most importantly, whether you’re looking to borrow money or just need a credit card, you must have a high one.
It evaluates the risk each lender is willing to take on when lending to you. The higher the score, the less likely any lender will be to reject your application. The lower the credit score, the more likely you’ll be rejected for loans and credit cards.
Why do people with poor credit have to worry about their credit score?
It’s easy to see why people with low credit scores should be worried about their credit score: If they’re unable to pay their bills, they’ll eventually be denied a loan or a credit card. Although debt consolidation loans bad credit options are available for people with poor credit.
But is that reason enough? Before you decide that you don’t need to care, there are some other points to consider: First, if you don’t have a high one, it could hurt your ability to get approved for loans in the future. It might also delay how soon you can buy a home and how much money you can borrow for retirement savings.
Secondly, poor credit can impact your life in other ways, including; higher rates on insurance policies, your relationships, mental health, and much more.
Is it possible for someone with poor credit to have a good FICO score?
The short answer? Yes.
But that’s not to say the process is easy. Some people have a low credit score with a high FICO score.
These individuals may have had some sort of financial issue in their past but have since been able to rebuild their credit up to a certain point. For instance, they might have had an outstanding balance on their existing loans, which is why they’re seen as too risky by lenders.
Some of these people with good FICO scores could be someone who has gone through bankruptcy or experienced some other type of financial difficulty but has since made payments on the loan, which is why they’re no longer considered risky for lending institutions. Their FICO score would reflect this new status as a “good risk.” In this way, those with lower scores can still make it big in the world of finance despite having less-than-stellar traditional credit ratings.
Are there ways to improve your FICO score?
The best way to improve your FICO score is to build a history of responsible and timely payments for everything from mortgages, car loans, and student loans.
Another way to improve your FICO score is to lower any outstanding balances on any cards or other loans, borrow money from friends or family members, or apply for a secured credit card with a low-interest rate. Those steps will help boost your score by demonstrating that you’re committed to managing your finances responsibly.