Do you know your credit score? Is it good or bad?
Typically, scores between 670 and 739 are considered good or desirable. Scores between 740 and 799 are very good, and 800-plus scores are considered excellent.
But what does it really matter if you have a good credit score or not? Will it really affect your life?
The short answer is yes. Most people don’t have tens of thousands of dollars (or more) sitting in their bank accounts. Therefore, big purchases must be made through financing.
To get approved for loans and other financing options, you’ll need to prove your financial credibility. For this, creditors will look at your credit score and credit history. With bad credit, you will either fail to get approved for the loan or get stuck with higher interest rates.
But what kinds of purchases require a good credit score? Keep reading for the top four:
If you don’t want to live in rentals for all of your life, you’ll need to build up your credit score so you can get approved for a mortgage loan. Home loan eligibility varies and there are programs for people with low credit scores. However, these types of loans will limit how much you can spend on a home, which may not be ideal.
With a respectable credit score, big purchases like new homes are easily financed. Your price range will be much higher and you can expect lower interest rates.
This is especially important on mortgages where a single percentile difference can equate to tens of thousands of dollars.
Vehicles are big purchases for which most consumers need to borrow money. While you can find some used cars for $5,000 or less, they may not be the most reliable.
If you’re looking for a new car, you’ll have a hard time finding anything under $20,000. You’ll need a solid credit score if you want to get approved for enough money for a decent car, new or used. And, of course, your credit score will also dictate your interest rate.
3. Recreational Vehicles
There are a lot of reasons to avoid a bad credit score. Aside from hindering your ability to afford the necessities in life, a bad credit score can also prevent you from enjoying yourself.
For example, if you enjoy the great outdoors, you probably have a number of hobbies like camping, four-wheeling, boating, fishing, and more. These hobbies often require big purchases like boats, RVs, four-wheelers, jet-skis, etc. Without a decent credit score, you probably won’t be able to buy any of these things.
4. Elective Medical Procedures
Finally, even the best health insurance policies rarely cover elective procedures. If you want an optional surgery, you’ll have to pay for it yourself.
Most people take out a personal loan to cover the costs. Without a good credit rating, however, you might have a hard time securing the funds you need for these types of big purchases.
Planning on Making Big Purchases?
Most of life’s big purchases require financing. Whether you’re thinking about buying a home, a vehicle, or an elective procedure, you’re going to need a credit score that will back it up.
If your credit is less than desirable, don’t worry. There are plenty of ways to build your score back up.