How your FICO score affects your personal finances
A FICO credit rating is a way for others to see how you handle debt. It shows them if you pay your debt off on time and if you are responsible. They essentially want to know what kind of risk you will be to their company. So, the lower your FICO credit rating, the higher risk you are. Your FICO score can affect your finances in a number of ways. Here is how your FICO score affects your personal finances.
Your FICO score can directly affect many decisions that are associated with your financial situation. Many people are surprised to see just how much a Fico score can impact different situations in their life.
How can your FICO score affect your personal finances?
Loans
You FICO score can affect whether you will be approved credit for mortgages, car loans and installment loans. This will also affect the interest rates of those loans. Landlords are constantly concerned with credit scores because they want to know if they can trust you to pay your rent on time. If you have a low credit score, you may have to pay a higher security deposit or you may be denied to rent from them at all.
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Insurance
The cost of your homeowners and car insurance will also increase with a FICO score that is low. It's harder for companies to trust those who don't pay their bills on time. In return for a low score, they make sure they cover themselves from that risk by raising your fees.
Credit cards
Credit card companies are more likely to give you a higher interest rate as well if your credit score is low.
Employment
Employers are interested in your credit score because it shows what kind of person you are. If you are in a lot of debt they might suspect you of being able to take bribes or even embezzle within the company.
If you haven't made the smartest financial decisions in the past, and your FICO score is low, there are ways to improve your current situation.
How can you improve your FICO credit score?
There are a number of ways to improve your credit score:
Pay your bills on time!!
Don't open credit accounts that you aren't going to use.
Don't open a lot of new accounts in a short amount of time, especially with a short credit history.
Pay off your credit card debt instead of moving it to lower rated cares. This will hurt your credit score.
Get and review a copy of your credit report and make sure it's correct.
If you open new accounts, pay them off responsibly and this will help improve your credit score.
How long will it take to improve your FICO credit score?
The negative situations will affect your credit score much faster than the positive situations. Any late payments can negatively affect your score in just a few months, but paying any bills on time may take anywhere from six to twelve months to show significant improvement in your credit score.
Your FICO credit score is obviously affects your personal finances and is very important to keep control of. Your FICO score affects more than just loans and credit cards these days, it also affects your ability to find work and housing. Maintaining a good FICO credit score should be the main focus of your financial planning, and you should always try to keep on top of your debt. Keeping control of your credit score will make your life a lot happier and it will be a lot easier when it comes time to get a home, a job or even a credit card.
