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Why Is Your Credit Score Important?

The modern economy runs on credit, and access to credit is regulated by credit scores, making them one of the most important aspects of your financial life.

If you never had to borrow money, then you might be able to get away with having a poor credit score, but for most of us, that’s not an option.

Most Americans who want to buy a new home, go to college or purchase a new car will need to take out some form of loan to pay for these expensive purchases. But credit isn’t just important for major expenses, because anyone who purchases goods or services with a credit card is also interacting with our credit-based economy by taking out a form of micro loan (which is different compared to a short-term loan).

When you run your credit card, the credit card company is extending credit to you, allowing you to pay for something with their money on the promise that you will pay them back later. For the convenience of being able to use their money, you’re charged interest on the transaction (that covers their cost of doing business, plus their risk that you won’t pay them back).

Think back to the time you first got that credit card you’ve been taking for granted – do you remember how you were able to acquire it? Do you remember having to apply for it, and going through a credit check to determine whether or not you’d be approved for the card?

Your credit score is incredibly important because it’s the primary determining factor used to decide whether or not you’ll be approved for that credit card, home mortgage, student loan or car loan. It’s the thing that regulates your access to the modern credit-based economy.

Having a bad credit score could prevent you from being able to borrow money, making it significantly more difficult to make large purchases of any kind. Having a terrible credit score might prevent you from borrowing completely, though it should be noted that there are lenders (like City Loan Long Beach) who specialize in offering loans to people with poor credit.
 

What is a Credit Score?

Credit scores range between 300 and 850. The best credit score is 850, and the worst is 300. Higher scores make borrowing money easier and cheaper, while lower scores (like those below 550) can make it nearly impossible to get a loan - at least from lenders who don’t specialize in bad credit loans.

Your credit score is calculated based on information found in your detailed credit report, a report of the way that you’ve handled credit in the past. Have you paid off your previous loans in full, and on time, or have you made late payments, let your loans lapse into default, or even filed for bankruptcy to wipe out your debt without paying it back? This behavior is what determines your credit score.
 

Which Credit Score is Most Important?

The most widely known and most important credit score is called a “FICO” score, which is considered to be the most accurate credit score, and the one used by most lenders when determining whether or not they’ll let you borrow money.

FICO scores, however, aren’t the only credit scores you need to consider, because Equifax, TransUnion and Experian all calculate credit scores using their own formulas, and it’s up to the lender to determine which score to use in their own evaluation of your credit-worthiness.

The simple thing to know about credit scores is that they’re based on your past financial behavior, and used by financial institutions to judge your ability to pay back the loan you want in a timely fashion. Having a better credit scores make it both easier (and less expensive) to take out a loan.
 

Credit Scores Regulate Your Access to Money

The second part of that last sentence is an especially important bit that some people aren’t aware of – your credit score is not just what determines your ability to get a loan, but also the cost associated with borrowing the money.

People with higher credit scores are able to borrow money at a lower interest rate, while those with poor credit are typically charged significantly more for the convenience of borrowing money. The reason lenders do this? People with poor credit are more likely to default on their loans, making them significantly more risky borrowers, so higher interest rates are charged to protect the lender from a potential default. These people often have to resort to borrowing using means like auto pawn loans or motorcycle pawn loans instead of unsecured loans

And that is precisely why credit scores are so important. These simple, 3 digit numbers don’t just regulate your access to financial assistance, they also determine the price you’ll have to pay for the convenience of being able to borrow money.
 

What is a Good Credit Score?

A “good” credit score is typically considered to be somewhere in the range between 661 and 780. A great credit score is anything over 781.

Here’s a breakdown of the differences between excellent, good, fair, poor and bad credit:

  • Excellent Credit: 781 – 850
  • Good Credit: 661 – 780
  • Fair Credit: 601 – 660
  • Poor Credit: 501 – 600
  • Bad Credit: Below 500

Remember, this doesn’t apply to every single situation, and is just a guideline to give you an idea of what the typical lender would use to determine credit-worthiness.

Different lenders use different formulas to calculate credit scores, and to decide which scores fall into which categories.

The difference between having good credit and fair credit can be as simple as making a couple late payments, but the difference between good credit and poor or bad credit can be due to drastic financial mistakes, like defaulting on a loan, filing for bankruptcy, or doing something else that would lead to major credit penalties.

The more blemishes you have on your credit history, the more your score will drop, making it harder (and more expensive) to borrow money in the future. Protect your credit score by being vigilant with it – don’t default on loans and make your payments on time to prevent from losing points.

 

What is a Bad Credit Score?

Bad credit technically starts at the 500 mark, but most people and many lenders will use “poor” and “bad” credit terms interchangeably.

600 is often looked at as the dividing line between good and bad credit, with anything above 600 allowing you to qualify for loans at a relatively inexpensive interest rate, while anything below 600 can lead to problems like difficulty securing a loan, or expensive interest rates for paying it back.
 

What if I Don’t Need a Loan?

You might think that you can ignore credit entirely as long as you don’t need to borrow money, but keep in mind that credit scores are being used for more than lending determinations these days.

In fact, even if you’re not in the market for a loan, your credit score could still have a major positive (or negative) impact on your quality of life. Here’s how:

Renting

Landlords have discovered that tenants with higher credit scores are more likely to pay the rent on time, stay in the house for a longer period of time, and just generally be more reliable renters.

For that reason, many landlords have begun running credit checks on the people applying to rent houses, apartments or other pieces of property.

In fact, many landlords believe that running a credit check is the fastest and most convenient way to assess a potential renter’s trustworthiness. So, we recommend borrowing, even if you do not need to, in order to build your credit. You can do so through installment loans, secured loans, or eve car equity loans.

Employment

This is a controversial process, but many employers (from small mom and cop companies to major multinational corporations) are now running credit checks on potential employees, using their credit as an indicator of whether or not they should be hired.

While it could be argued that credit has very little to do with work quality, or intellectual ability, this has become a standard practice in certain industries (especially those having to do with finances), and especially for the highest paying positions.

Employers tend to believe that people who are able to handle their own finances appropriately are more responsible than those who don’t, and that these responsible people will make better employees.

Whether or not you agree with that determination (and even though we can all agree that there are clearly financial issues completely outside of people’s control), this is something you’ll want to keep in mind when job hunting.

Insurance

Everyone’s familiar with applying for insurance, especially now that it’s mandatory for both automobiles and healthcare, but not everyone realizes that their credit score may be taken into account during the applications process.

Some insurance companies will require a credit check before issuing an offer of insurance, and others will actually base their monthly premiums (in part) on your credit score!

Whether you are looking for car insurance or homeowners insurance, your credit score is likely to play a role in determining your monthly premium. Insurance companies typically calculate premiums based on an “insurance score” including your credit score and a few other factors, letting those with better credit pay less for their insurance coverage.

And while a bad credit score won’t necessarily keep you from obtaining insurance, is it likely to lead to having to pay higher premiums. On the other hand, having a good credit score will likely reduce your monthly premiums, or even qualify you for discounts!
 

How to Improve Your Credit Score

Since your credit score affects so many different aspects of your life, it’s important to protect yourself from poor credit and to work on improving your credit score on a regular basis.

If you do happen to have poor or even bad credit, don’t give up, because there are several different ways to improve your credit score without a lot of work.

The most drastic way to improve your score is to consult with a credit counseling or debt management agencies who can help you consolidate your debt, which means reorganizing it in a way that makes it easier to track and pay off.

However, these services often cost money, and typically don’t do anything that you couldn’t do on your own (including argue with your lenders on your behalf for rate reductions, loan forgiveness or other financial assistance benefits), so they’re not for everyone.

Here are some simple, low to no-cost solutions you can leverage to improve your credit quickly:

  • Cut back on unnecessary expenses so you can apply extra income toward your existing debt
  • Pay off or close credit card accounts, keeping only 1 or 2 active and open
  • Make sure to pay off all bills in a timely fashion
  • Monitor your credit report and correct any errors it shows
  • Get your total debt to income ratio below 20%
  • Don’t let your debt limit cross 20% each month (pay off your credit card bill weekly)
  • Take out a secured loan against yourself (borrow $1,000 from your own savings account, then make monthly payments to pay it back on time)
  • The more of these suggestions you’re able to complete, the more your credit score will raise. Keep in mind that credit scores do take time to improve, and that moving from bad credit to excellent credit won’t happen overnight, but it can be done with a diligent effort.
  • Perhaps the most important thing to keep in mind is that you must check your credit score regularly to ensure that your credit report is accurate.

 

City Loan Long Beach Can Help

Whether you have great credit, terrible credit or no credit at all, City Loan may be able to get you the cash you want today!

If you find yourself in need of some emergency cash, contact City Loan Long Beach to get a secured personal loan within mere minutes.

We offer the best car title loans, also known as auto title loans, or vehicle title loans in California, and we’re widely regarded as the Golden State’s best provider of loans for people with poor credit.

Our auto title loans are fast, easy and convenient, and we can get you the money you need within hours of receiving your completed application.

Don’t worry about your previous financial history – we have been able to lend money to people with late payments, defaults, car repossessions and even bankruptcies on their record. Even if you’ve already been told “No” by other lenders, we may still be able to help!
 

Find a City Loan Near You

You can find the best car title loans City Loan has to offer in states like: ArizonaSouth CarolinaMissouri,  UtahTexas,  California, and New Mexico. If you don't see your state on the list, don't worry because our service area is growing!

Are you a Long Beach Local? You're in luck! Our main office is located right in the heart of Long Beach, California. You can find us here:

Address: 
3431 Cherry Ave,
Long Beach, CA 90807


We offer the best car title loans in Long Beach, with the fastest and most efficient service. Don't waste your time going to anyone else!  Contact City Loan and get the money you want today by applying online or calling us now at 1-888-238-9085.