Lots of us have got in a muddle with finances at one time or another. From getting over committed on credit cards and loans to falling behind with utility bills, feeling the pinch at Christmas or having to spend savings on things like medical or dental bills or home repairs. There are lots of reasons you can end up behind with money and from there, in debt – even if you’re a sensible person and earn a decent wage. However if this has happened it’s important to dig yourself out of the hole as quickly as you can, as once you ruin your credit score you make life significantly more difficult for yourself for the next six years. After that, your adverse credit drops off your credit file, although that doesn’t automatically mean you have a good credit score. Here are some of the reasons your credit score is so important.
It Can Help You Get Onto The Property Ladder
Unless you have a substantial amount of cash, for example from a large win, inheritance or savings then you will need a mortgage to get onto the property ladder. And to be accepted for most mortgages, you generally need a good credit score. It is possible to get home loans with bad credit, but there will still be limits so if you’ve really destroyed your score and been silly with credit in the past then you’re likely to struggle. Getting onto the property ladder means no more wasted money with rent, everything you pay is going into something that you own. Houses appreciate in value, so just living in your home is earning you money each year. Even renting can be tough with adverse credit, letting agents will run checks and if yours is poor then you could be refused on this alone. This is because it indicates you’re not good with money, and could run into arrears with your rent.
To Buy a Car
Having your own car gives you so much independence. A car isn’t just a status symbol, for most people it’s absolutely essential to be able to maintain the life they want. Being able to drive means you could improve your job prospects where you can apply for things a little further out. It means you’re not having to rely on friends, family or use public transport which only runs certain routes and at certain times. You could buy an older car with cash, however the repairs and insurance are likely to be sky high so it often makes better sense to choose a newer car. But this of course means a higher price, which most people are only able to afford with car finance. And for that, you need a reasonable credit score.
To Take Out a Loan
There are times in life when you need access to money fast, and being able to do so can make a stressful situation much more manageable. For example, if an appliance breaks down, you get stuck on holiday or need money for medical reasons. Of course, having savings is better but if the amount you need exceeds your savings then you need a fallback option. A good credit score gives you access to a loan, and at the best interest rate too.
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