Why Rebuilding Credit Matters?

To have a future that is more or less free from financial worries, you need to rebuild your credit. Your credit history plays a determining role in whether you can have access to many of the essential things in life that most of us take for granted. Imagine trying to open a cell phone account and being told that you can’t have one as you have bad credit. It gets worse. You also won’t be able to rent an apartment, qualify for a mortgage, get a credit card, get better car insurance, and get many utilities.

The reason for this is that your credit score is a record of how you have managed your finances in the past, and it signals how you are likely to handle them in the future. It is an indication of whether you are a reliable and responsible individual that creditors and lenders can trust when it comes to repaying loans. And, as such, your credit score, especially if it is good, makes it possible for you to get the financial backing that you need to decide where to live, which house to buy or rent, and more.

Here are some of the reasons why rebuilding credit matters:

It impacts your home purchase

You need to have a credit score of 740 or higher to be eligible for the best available mortgage rates. While the Federal Housing Administration (FHA) loans are available to people with bad credit, you will still need to have a FICO score of 580 to qualify. That will make it possible for you to make a down payment of 3.5 percent. If your score is lower, most lending institutions will require a 10 percent down payment before they agree to give you a loan.

On the other hand, if your credit history shows a long record of late payments, foreclosures, and repayments, it may even be impossible to get a home loan.

It affects your home rental

When you want to rent an apartment or a house, it is customary for the landlord to either ask you for your credit report or carry out an independent online credit check on you. If your credit history is sound, they won’t have an issue with renting you the property. However, if you have bad credit, the chances are high that you may make late rental payments or default on the rent entirely. No landlord or property manager wants to take on that kind of risk. And, for that reason, they may decide to not consider your rental application.

It bears on buying and insuring your car

In the same way as buying or renting a home, you need to have good credit for buying and insuring a car. With good credit, you can get better loan options to buy the car of your choice. Bad credit, however, could lead to your getting a loan with high-interest rates, or you might not qualify for a loan at all. Similarly, when it comes to getting adequate auto coverage, the insurers are going to check your credit history first thing and set the rate according to that.

Starting a New Business

A high credit rating is necessary for getting a business loan to start a new business. If you have a bad credit score, the bank is likely to reject your business loan application.

Finding Employment

To make sure they are hiring reliable people, many employers now make their hiring decisions after they have checked the credit score of the applicants. These types of checks are particularly essential in jobs in the finance and security fields. While they need your permission to run such checks, you might find yourself out of consideration if you refuse.

As you see, having bad credit is almost like becoming an outcast in society in the present time. You will find yourself excluded from a variety of everyday things. To avoid getting into such a situation, the best thing you can do is to rebuild your credit by repaying all your outstanding bills and loans and getting rid of your negative credit report as soon as possible. You should also make sure that you never venture into bad credit territory hereafter.