What Good Credit Means to You

Introduction to the Impact of a Good Credit Score in the 21st Century

Although credit scores benefit a creditor, insurer, or employer, they are also good for you—as long as your score is high. Your good credit means that you are less of a risk because you are less likely to default on your loan. While your score truly is more of a predictor of your behavior, it’s accurate enough that lenders will often draw a line and stick to it, even to the exclusion of a point below their boundaries.

What a Good Credit Score Means to You

Although the credit report and credit score doesn’t include personal items like income, personal preferences, employer, etc., it can tell enough about you through statistics that a lender knows what you will do. Here’s why: out of 10,000 people, only 110 with scores of 800 and above will have delinquent payments, while 870 in the lowest scores will be delinquent.

How do Credit Scores Work

How do the credit bureaus know that? Well, the know that the delinquency rate of people in the 800+ category is only 1%, and that 11% of the population falls into the 800+ range. Although only 1% of the population falls into the 300-499 scoring range, a whopping 87% will be delinquent on payments. A lender who takes a chance on the lower scoring population will be charging higher interest.

The Impact of Your Credit Score

This means your good credit is worth a lot less risk to the lender. They will save money on your high score, and can offer you better loan terms, interest rates, and perks. Those with good credit don’t end up in the hands of predatory lenders, either—they aren’t forced into the sub-prime lending market because their credit scores make it possible for them to have approval for the best mortgage rates.

Consumer Groups and Your Credit Score

Although some consumer groups are fighting against this tendency, insurers often view people with higher credit scores as less of a risk, stating that statistics show lower credit scores will bring a higher number of claims per person. Perhaps it means that those who are more responsible with money are more responsible in general and have fewer accidents.

Potential Employers and Your Credit Score

Employers often look at credit scores as we, although they must have your permission to pull your report. If you have a good credit report, you will be considered a good risk for security jobs, management, and any position where you have to handle cash. People with good credit scores are often perceived as more honest by potential employers, as well as more responsible.