How Credit Score Ratings Affect You

In order to obtain lower interest rates on loans for cars and homes or on credit card accounts, a consumer's credit score must be of a certain number. A consumer's credit score ratings typically have to be considered good or excellent in order to get the lowest rates of interest.

However, your credit score can affect you in many other ways, as well. That is why is it so important for you to maintain a good credit rating. How credit score ratings can affect you, the consumer, is explained below:

#1: Interest rates

Credit score ratings typically fall between 300 points and 850 points, with 300 points being the lowest score. Scores on the higher end of the scale, are considered to be anywhere from good to excellent. The higher your score, the lower interest rate you will be eligible for. Lower interest rates translate into lower payments and money saved. The lower the score, the higher interest rate you will be offered. If your score is too low, you won't even be eligible for a loan.

#2: Insurance

Some insurance companies are actually using a consumer's credit history to determine the probability of the consumer actually paying the premiums. Insurance companies don't use the same rating system as banks and creditors. Instead, they use something called an insurance score that is based on the consumer's credit. Therefore, you can be denied insurance.

#3: Universal Default

This is a practice enforced by some creditors. If you, as the consumer, happen to default on another credit card payment, or loan, creditors that practice universal default have the right to raise your interest rate on the credit card they have issued to you to the default rate, which is generally quite high. This can happen even if you have never been late on or missed a payment with that particular creditor.

#4: Other

Credit score ratings are also viewed by landlords, employers and department stores or merchants. You can be denied the option to rent an apartment or home. You can even be denied a job on the basis of your credit score.

Credit scores have much to do with whether a consumer will be granted a loan, a credit card, insurance, a place to live or even a job. The best thing a consumer can do is actively monitor his or her credit report and make good decisions in relation to his or her credit.

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