Does Credit Really Matter?
The short answer is YES. Credit matters and your score is important.
Your credit often plays a key role in whether or not you will be approved for housing, a credit card, a vehicle loan, a home loan, and more. Despite the fact that “credit” was often not a subject covered during your time in school, it is certainly a subject that is worth learning more about as you pursue your financial goals.
When Credit Scores Matters: Approval vs. Denial
Housing
Whether you are applying to rent an apartment or house, or for a mortgage to buy a home, your credit is likely to be one of the main factors considered by a landlord, a property management company, or a mortgage lender.
There are certainly other factors that may be considered as well such as your income, the length of your employment, and your rental payment history. However, your overall credit health will be a major determining factor in the decision to approve or deny your application for housing.
Auto Loan
It is common to need to borrow money to buy a vehicle as we have all seen the rise in vehicle costs over the years. Often, vehicle lenders will consider your credit in determining whether or not to lend you money to buy a vehicle.
Credit Cards and Other Lines of Credit
Credit cards and other lines of credit can be helpful for unexpected expenses, for major purchases, and for building your credit. Your credit is likely to be considered in determining whether or not a lender will approve or deny your application.
Interest Rates and Other Terms
Your credit can also be an important factor in determining the interest rates and the other terms of your loan. Generally, higher credit scores are associated with better interest rates and terms. This means that not only does credit determine whether or not you will be approved for the loan, it also determines how much the loan will cost you.
For example, if you are approved for a vehicle loan for $15,000 to be paid over a 60 month period with an interest rate of 5%, the monthly payments are likely to be approximately $283 and you would pay interest of approximately $1,984 over the life of the loan. In summary, the total amount you would pay for the loan would be approximately $16,984.
However, if you are approved for the same $15,000 vehicle loan to be paid over a 60 month period with an interest rate of 15%, the monthly payments are likely to be approximately $357 and you would pay interest of approximately $6,411 over the life of the loan. In summary, the total amount you would pay for the loan would be approximately $21,411.
In this example, the vehicle loan amount is the same, but how much you would have to pay monthly for your car payment and overall is impacted greatly by the interest rate, which is determined by your credit.
Learn More About Credit
For the entire month of March, Financial Freedom Legal will focus on increasing credit awareness. Each week, we will share a new blog post with news you can use about credit.
You are also welcome to join us and mortgage loan officer, Lynn Bossi-Kinsel, on March 22nd at 6:00 p.m. for a free event to get answers to your questions about how credit scores are calculated, how to build and rebuild credit, and what mortgage companies are looking for when reviewing your home loan application.
For more information about this event visit https://fflegalva.com/event/behind-the-score-credit-building-homeownership-and-more/.
You can also reach Steve and Vee anytime at 804-FREEDOM for additional information.
