Credit Scores it Is Critical

Credit Scores

It is critical to maintain one's credit score, and to be aware of the different factors that contribute to the credit score. The videos and websites have highlighted the different factors that contribute to the credit report. For example, the credit score is comprised of a mix of payment history, amount of credit owed, mix of credit, how long you have had credit and the number of credit inquiries. It is essential to be aware of these different factors and ensure that you are taking the right actions to maximize your credit score.

There are a number of reasons for this. The first is financial. The credit score is seen as a measure of risk, so the lower the credit score, the riskier you are as a borrower. Lenders seek to compensate higher risk with higher returns. Therefore, you will see your borrowing costs increase if your credit score is low. This is important enough with a car loan, but on a mortgage the additional costs could add up to tens of thousands of dollars over the life of the mortgage.

Aside from the financial considerations, there are other ways that a low credit score can hurt you. Some companies look at your credit score as a means of judging your character, and a low credit score implies a degree of irresponsibility. Therefore, people have been known to lose out on jobs because they did not have good credit. It is important to remember that a missed credit card payment can stay on your report for seven years, so a person could miss out on a job, or pay a higher rate of interest on a mortgage, for something that happened many years ago.

It is perhaps a little bit strange for employers to ask for access to your credit score, but they ask for other things like Facebook passwords as well. As a potential employee, I would probably balk at working for a company that would think these things are a measure of my ability, but in a lot of cases people do not have a choice. The video from ABC discussed this problem with some people who were in a position of needing a job in order to pay down their debt, but unable to get a job because of the debt. This is a difficult position to be in. Regardless of the ethics -- or merit -- of using credit scores as a measure of one's character, it is always good to manage your credit score because you never know when you will find yourself in a position where it is important.