First of all, you need to understand what is meant by a “credit score.” The fact is, most consumers still don’t understand that their credit score measures their credit risk. Your credit score, sometimes called a FICO score for the Fair Isaac Corporation, is based on information about you from companies that gave you credit in the past. The lower your credit score, the higher the risk you pose to banks and other lenders. In this article, we will spell out five reasons why raising your credit score will improve your life.
Reason #1 A higher credit score will get you a more affordable mortgage. Particularly in these days of tightening credit, banks pay close attention to your FICO score when you apply for a home loan. Improve your credit score and get a lower interest rate. Just a 2% reduction in the interest rate on a 30 year fixed mortgage on a $200,000 home will save you over $96,000! Now, isn’t that worth doing a little work on improving your credit score
Reason #2 Pay less for your car. The interest rate on your auto loan is closely linked to your credit score. Clean up your credit report, and you’ll be able to afford a nicer car for the same monthly payments!
Reason #3 Lower your auto insurance premiums. It’s true! Many auto insurance companies check your credit score before they set the premium on your insurance. They think that a high score means you might be a safer driver. It makes a lot of sense to play along with their rating game, if it means you’ll save money on car insurance.
Reason #4 Get more affordable life and health insurance. Many consumers don’t know that the premiums they pay for their life and health insurance are affected by their credit score. Insurance companies spend a lot of time and money trying to figure out which customers will make their business more profitable. And the insurers have determined that customers with low FICO scores have a harder time paying their monthly premiums. So, they reward customers with a better credit score by offering them a lower premium on life and health insurance.
Reason #5 Land a better job. You may be shocked to learn that more and more employers are doing credit checks on job applicants before hiring them. While the employers may get your credit report to verify information you put on your job application, what’s to stop them from seeing how you handle your financial affairs, too It would be a shame to lose out on a good-paying job just because you were late on a couple of credit card payments.
Many more aspects of your life are being affected by your credit score than you might have imagined. Raise your score, and you may well raise your standard of living through lower interest rates, a better job, and a more affordable lifestyle. But how can you repair your poor credit rating There are many options, ranging from credit restoration companies (some of whom are reputable and affordable) to do-it-yourself plans. You owe it to yourself to look at all the options, and then to take action.
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