Credit Scores - Do They Really Matter?

By Rich Ruzic

Well, like it or not the answer is Yes. Unfortunately they actually play a bigger role in our lives than most people realize. Not only are your credit scores factored in when looking for any type of financing, they also come into play in other areas such as insurance and employment.

In today’s technological world everything is centered on being as efficient and productive as possible, in other words, let the computers handle as much of the workload as possible. Since we all know that computers are not at the point of being able to reason or make decisions based on judgment, it stands to reason that computers must be fed a number of facts before a decision can be made. One of those primary facts is your credit score. This is a number between 450 and 850 made up of a number of complex factors (so many factors that even most credit company insiders cannot tell you the formula used) that basically predicts how well you will pay. The higher the number, the more likely you are to pay your bills.

Insurance companies are interested in this because they bill out most of their premiums. In other words, they become one of the many bills received every month and they want to know how likely you are to pay the bill. If your score is below a certain level one of two things could happen; you will be turned down for the insurance or you will be charged a higher premium to offset the risk that based on your score you may not pay the bill. As you can see neither of these option are preferable.

Employers like to see higher credit scores because to them it represents stability. This is especially important for climbing the corporate ladder into management positions and outside sales where a person may not be supervised at all times. If you will notice on almost any employment application these days you are authorizing the potential employer to check your credit, read the fine print.

These are just two examples outside of the loan process, which almost always will involve your credit scores, that shows how your scores can save or cost you money. So what does this mean? Know where you stand. Know what your scores are and learn how to keep them as high as possible. This could potentially save you thousands of dollars in fees, interest, premiums, etc...

Here is one little bit of information that will help your scores tremendously; keep your balances on your credit cards below 75% of the credit line. In other words, if you have a credit card with a $1,000 balance, keep your balance below $750.00. Credit cards can be very dangerous to a consumer and it is usually the first thing that does not get paid when someone is struggling financially. Because of this credit cards are weighted heavily in your credit score and higher balances usually indicate that someone is having to use the cards to survive or is spending out of control. Keep your balances low to avoid a major hit in your credit score. Use this and any knowledge you can get your hands on to keep your scores high and enjoy the savings.

Rich Ruzic has been in the mortgage business for 15 years and publishes articles on the subject for both individuals and corporations.

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