Reason for credit scores.

Your credit scores determine a lot more than the loans you can get and the interest rates you pay. Insurers use credit scores to set premiums for auto and homeowners’ coverage. Landlords use them to decide who gets to rent their apartments. Credit scores determine who gets the best cell phone plans and who has to make bigger deposits to get utilities.

Before giving credit to consumers, companies need to have more data about their behaviour. And, with this data, they make a more adequate credit risk analysis. That’s where the Credit Score comes in. This tool shows the chances of a group of people with the same profile paying their bills on time.

The companies you enter into a financial relationship with, identify your credit score to help develop a clearer picture of your credit history, then analysts will delve into the meaning of that score by possibly requesting further details of your history, as well as the documents necessary to submit the request. However, it is important to dispel a misunderstanding: it is not only important how much you earn, but how you manage that income, which lenders will take into consideration.

Once your credit score nears 700 or so, you’re considered a good risk. When they’re over 760, you’re golden. You should expect the best rates and terms lenders have to offer, since they’ll be competing hard for your business.

Reconsider your auto insurance as well, especially if your credit has improved substantially since your policy was set up. Your current insurer may not check your credit at renewal time; ask it to re-run your rates. It’s a good time to shop around as well.

With all the money you save, you can make progress on important financial goals such as saving for retirement, boosting your emergency fund or getting out of debt faster. That’s the real power of great credit scores. Instead of begging for loans, paying too much and trying to make do with what’s left over, you’ll finally have some options to get ahead.