Why is it important to get a credit score?
Alison Bennett
Alison Bennett is a licensed Loan Officer working in PDLoans247 for over 3 years. She has been in the loan industry since 2004. Alison makes sure that all aspects of the client's collaboration with PDLoans247 are handled with the utmost professionalism and personal approach. She understands that the borrower needs to trust a loan officer fully when making a financial commitment, and she's doing her best to make it possible. Considering each client's interests, Alison assists them through the process without the hassle and offers the most favorable loan solutions. Expertise: Payday loans, Emergency loans, Mortgage
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While having a good credit score has numerous advantages, there are some situations where it may not provide direct benefits. Here are a few scenarios where a good credit score may not be as advantageous:

Limited credit options: Even with a good credit score, lenders may have specific eligibility criteria or loan requirements that may limit the options available to borrowers. For example, certain lenders may prioritize other factors like income or employment history over credit scores.

Other financial considerations: Credit scores do not reflect a person's complete financial situation. Lenders and financial institutions may consider other factors such as debt-to-income ratio, employment stability, and other financial obligations when assessing creditworthiness. Therefore, solely relying on a good credit score may not be sufficient for some types of financial transactions.

Non-credit related decisions: While credit scores are mainly used for credit-related decisions (such as loan approvals), they may not have an impact on other non-credit decisions. For instance, landlords, employers, or insurance companies may not solely rely on credit scores when making their determinations.

In summary, while a good credit score generally provides a range of benefits, it may not always result in the most advantageous terms, and other factors may also come into play for various financial considerations.

Pros and Cons of having a good credit score

Lower Interest Rates
Easier Loan Approval
Higher Credit Limits
Better Insurance Premiums
Increased Negotiating Power
Complacency and Over-Borrowing
Potential for Identity Theft
Increased Access to Credit
Limited Impact on Non-credit Decisions
Potential for Credit Dependency
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What is good credit

A credit score is a special digital number which consists of 3 components. Relying on information provided by FICO a good credit score ranges between 670 and 739 points. What concerns another source – VantageScore it varies between 661 and 780. To have a good credit score there are lots of things that one should comply with. For example, But at the same time there are parameters which are not considered to be a benefit of having a good credit score. There should be mentioned 5 parameters.

Parameter 1.  Marital status, sex, nationality, religion and race. 

According to the law it is illegal to inquire information about one’s marital status, sex, nationality, religion and race. It is also forbidden for lenders to make decisions on lending money based on this parameter. The obedience of the law is controlled by the Consumer Credit Protection Act. 

Parameter 2. Client’s income, employment history and occupation.

Of course, lenders quite often make their decisions based on the criteria mentioned in the Parameter2. But at the same time these points (income, employment history and occupation) are not needed for your credit report. It means that a person who cannot boast a high salary or unemployed can have an excellent credit score. What credit score indicates is the way you manage your debts and other financial obligations. Your economic level is disregarded. 

Parameter 3. Rental agreement, child support, family obligation

Just like with the previous case rental agreement, child support are not considered to be a benefit of having a good credit score. They can be inquired by a lender while considering your application. For example, total monthly obligations can be taken into account by a lender for adding up to less than 36% of your income. The same can be done in relation to child support.

Parameter 4. Age

Your age is not an obstacle for taken a loan or a mortgage, for example. That’s why it is not a benefit of having a good credit score. Even an 80 years old person can get a 20 years mortgage, for instance. In spite of the fact that the data of person’s birth is mentioned in his or her credit score it has nothing to do with a credit score.

Parameter 5. Certain types of inquires

Consumer initiated requests made by a person to inquire about his or her credit report are not taken into account. Besides, so-called promotional inquires made by loan suppliers in order to make a decision on your request is also disregarded. 

At the same time there are 5 more points which play a significant role in your credit score. The first parameter which is beneficial for your credit score is your payment history. It presupposes the payment for the bills on time. The second beneficial parameter is the amounts of money that you owe on different credit accounts. Moreover, the percent of one’s available credit used is taken into account. Parameter №3 is the length of your credit history. The duration of the whole your credits is taken into account. Parameter 4 – Credit Mix. It includes all the credit cards, instalment loans and other credits or loans that are related to your name. Parameter 5 – recent credits. This parameter includes all the new credits taken within a recent time span. These points are crucial and affect your credit score. What concerns 5 parameters mentioned in the very beginning of the article (marital status, race, religion, etc.) they are not a benefit of having a good credit score. 

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Good credit score means that:

  1. The best options to take a loan will be given to you. It is a well-known practice as creditors tend to confirm applications with good credit scores. Besides, such applicants get a chance to sign an agreement that will contain more attractive figures (APRs and terms of paying off). In other words, taking out a loan will be less expensive.
  2. More attractive car insurance rates are offered to those who can boast better figures. Only reliable clients are in favor. 
  3. Better Social Status: A stellar credit score is a badge of honor, worth boasting about, particularly if you’ve diligently transformed a dismal score into an impressive one. If you’ve never had the misfortune of a poor credit score, continue your diligent efforts to safeguard your esteemed standing. N.B. a mere handful of missed payments can make a big spot on financial trajectory.
  4. Possibility to find a good job. As employers are interested in good employees, they can check information related to your credit score. All companies with good reputation prefer reliable employers to others. Having a good credit score is a compulsory parameter to deserve this or that position.

Credit report with score on a desk

So, credit score is intended to measure one’s credit behavior and track the way a person paid off existing debts, if there are any. 

If you want to control your credit score, you can opt for the best credit score apps. We’ve chosen for you the best options:

  1. Aura can  be characterized as one of the most reliable apps. You can use any kind of device to control. The app is connected with three major credit checking bureaus.
  2. Credit Karma is a free app. It gives you clues on improving your credit standing. 
  3. Credit Sesame offers a monthly credit score update from TransUnion, giving you a comprehensive breakdown of the nuances that contribute to your score.
  4. CreditWise by Capital One allows you to stay one step ahead with timely alerts, ensuring you are promptly notified of any modifications to your TransUnion and Experian credit reports. 
Frequently Asked Questions
Does checking your credit score lower it?

The harm can be done only in one case - when a creditor checks it. When it is your initiative to check, there’s no need to worry about it at all. the figures will remain the same.
What is the benefit of a good credit score?
Having a high credit score increases the likelihood of qualifying for the most favorable interest rates and fees when applying for new loans and lines of credit.
Which of the following does not have an impact on your credit score?
As credit files do not include information such as race, gender, marital status, education level, religion, political party, or income, these details cannot be taken into account when calculating your credit scores.
What is the key significance of a credit score?
The most crucial aspect of a credit score is payment history. It is the primary factor in determining your FICO® Score, which is utilized by 90% of leading lenders. Additionally, the amounts owed, particularly the utilization of available credit on your accounts, is closely evaluated.
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