Reasons Your Credit Score is More Important Than Ever

8 years ago

Most people know that good credit is key to financial health. Few
realize that now more than ever strong credit is important. As the
economy struggles you’ll need to work harder to prevent a credit score
downward spiral.

The “Secret Sauce” Formula is Still Secret

Consumer advocates are angry that the algorithms used to determine
credit scores are still top secret. You might be peeved about this,
too. But take note: until very recently you weren’t even allowed to see your credit score!
Can you imagine how unfair that was for many years? The Fair Credit
Reporting Act (FCRA) was established in 1996 and revised in 2004. The
system is unjust, but, at least today you can access your report for
free once a year. A report will allow you to correct any mistakes… but
you have to pay to see your score.

Tightened Credit
Banks are nervously tightening their grip when it comes to lending
funds. Why should they lend to anyone except the people with pristine
credit? They should
lend us the taxpayer money used for the bailouts — but will they?
Similarly, credit card companies are pulling back credit limits in an
attempt to control increasing numbers of people unable to pay their
credit cards.

Bottom line: banks and credit card companies are looking after their
best interest. Their best interest is to lend money to people with a
proven repayment track record. Therefore you must do what you can to protect or increase your credit score.

Everything’s Connected
Your credit score is connected in multiple areas of your life. It
follows you as you search for an apartment or take a mortgage to buy a
home. A credit score can be legally obtained by potential employers or
insurers doing due diligence on applicants. If you neglect your credit
report and it’s score you can quickly find yourself paying more for
rental deposits, car insurance, mortgages, and a host of other things.
You can literally spend hundreds, perhaps thousands of dollars more
each year based on a bad score or mistakes on your report. Therefore,
it is important to spend a few minutes each year evaluating your report
from each of the three credit agencies. You’re entitled to a free
report from annualcreditreport.com

Bad Credit?
If you have poor credit or a report filled with dozens of errors, don’t
despair. While no one knows the exact methods used to calculate a
score, there are some proven strategies you can employ to rebuild.
First and foremost you must check your report and correct any mistakes.
Here are more detailed steps.

Finally, it is good to consider an analogy. You can’t control the
weather, but you can control what you wear. Likewise, you can’t control
the economy, but, you can control how you shore up your most critical
basics: your credit report and credit score.

Related:
How to build your credit - 3 must reads!
Four Ways to Legally Clear Credit Card Debt
Death of the Credit Card Economy?

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