Why FICO Credit Scores Are So Important

A good FICO credit score is one of the most important aspects of a healthy financial situation. Knowing what affects your FICO score and why a good one is so important gives you great financial freedom and can save you a great deal of money. A FICO score boils down all of your financial history into a number, which is used to determine your fitness for loans, credit cards, rentals and even your employment and insurance rates.

Credit: FICO scores are most often viewed when you apply for a loan or a credit card. Based on a lender's criteria, a poor FICO score may mean that you won't qualify for a particular loan or card, or if you do that you will pay a much higher interest rate. Conversely, a good FICO score can result in lower interest rates on loans, meaning you can save a considerable amount of money on the loan over time.

Renting: There is more to your financial health, however, than loans and credit cards. As a result, FICO scores can also be used to determine your desirability as a renter. If you've ever tried to rent an apartment, odds are your potential landlord checked your credit score. A FICO score tells a landlord whether you pay rent on time and if you've ever packed up and moved in the middle of the night. Much like a loan, if you do manage to rent a place with a poor FICO score, you might be required to pay a higher security deposit.

Employment: If you're looking for a job, your FICO score can be just as important as if you were shopping for a low-interest loan. Potential employers are allowed to check your FICO score. A poor FICO score tells your potential employer that you can't manage your own finances or that you are in need of money, which may prompt them to question your responsibility and loyalty in other areas.

Insurance Rates: Finally, a good FICO score can even help you find the best insurance rates. Insurers can check your FICO score when you're searching for home and auto insurance. Many insurers offer discounts for good FICO scores. You could be charged more for a poor score or be denied insurance entirely if your FICO score indicates that you don't pay your bills on time or at all.

A good FICO score can make all the difference in how much you pay in interest. It can also mean the difference between good insurance rates, getting a job and getting an apartment.  

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