Good credit isn't just a cause for self-congratulation. Credit records are used for a variety of things, from establishing utility accounts to purchasing a home, and the better someone's credit is, the easier many routine tasks will be. Poor credit can make it difficult to open a bank account, rent a home, or get a good rate on a car loan, while good credit will clear the way in a variety of situations.
One of the major reasons why good credit is beneficial is favorable rates of interest. Low interest rates on loans are offered to people who appear to be low credit risks, as it is assumed that someone with good credit will pay the loan off in a timely fashion. People with bad credit will generally experience much higher interest rates, as the lender wants to protect itself in the event that the borrower defaults on the loan.
If people want to apply for credit cards and lines of credit for themselves or their businesses, a high credit rating is crucial. Poor credit may lead to the denial of an application, or to a very high interest rate on carried balances. People with high credit scores can also generally get higher balance limits, allowing for more flexibility with a line of credit, which can be extremely useful. They may also be rewarded with a waiver for annual fees, and other perks.
Even if people aren't interested in being able to access lines of credit, good credit is still important. Utilities such as phone and electric companies usually check credit before they open new accounts, and they may deny an account or demand a very high deposit if the credit check reveals a poor credit history. Landlords are also usually inclined to deny rental applications from people with bad credit, viewing them as potentially risky tenants.
A number of things can impact someone's credit record, making it important to safeguard one's credit record by regularly ordering credit reports to check for suspicious activity, and by doing things which will improve an overall credit record. A credit simulator program can be used to see how different activities will alter a credit score. For example, paying down outstanding balances will generally cause a credit score to increase, while missing payments or taking out a loan will cause a decrease. By managing money wisely, people can ensure that they have good credit to call on when they need it.
