The Importance of a Good Credit Rating

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As a society we are becoming increasingly dependent on the use of credit so it is more important than ever to manage and maintain a good credit rating.  The following are examples of how credit can impact our everyday lives.

Borrowing As part of their decision making process banks and other lenders will access our credit report and use our credit score to determine whether or not we are an acceptable risk.

Interest Rates Generally with a stronger credit score you are in a better position to negotiate lower interest rates.  A poor credit score limits your ability to negotiate and could cost you thousands in interest.  For example, on a $180,000 mortgage if your interest rate was only 0.5% higher it would cost you an additional $14,449 of interest over 25 years.

Employment More employers are now including credit checks as part of their hiring policies.  While it may not be the sole factor in determining whether or not you get the job, there are certain types of employment that require a clean credit history.

Insurance Some insurers have begun using credit rating to determine whether or not to provide you with insurance services and what premiums to charge you.

Landlords Most apartment buildings are now owned by larger property management companies.  Not unlike banks, they will use your credit rating to determine whether or not you are an acceptable risk.

Utilities If you have poor credit or unpaid utility bills from your past, the utility company may decline to provide you with services or may require a large deposit.

Relationships We are not suggesting that people should pull credit reports on prospective partners but past credit decisions could impact the relationship.  A young couple’s dream of buying their first home can be shot down or delayed if one of them has a poor credit history.

Small Business Many people have dreams of starting their own business and working for themselves.  However starting a business may require you to invest your own cash.  If you don’t have all of the necessary funds you will need to obtain a small business loan.  With a poor credit rating you may not be able to qualify for the financing to start your business.

Since your credit score is a reflection of how you have or have not paid your bills in the past, many businesses – landlords, mortgage lenders, utility providers, and even employers – use your credit to predict your future financial responsibility.  Anytime you need to borrow money, or even use services, your credit is may be called into question. This is why maintaining good credit is so important.

For a free consultation over the phone or in person in Saint John, Moncton, FrederictonCharlottetown or Dartmouth, please contact us.  Powell Associates Ltd. is a licensed insolvency trustee focused on providing debt settlement, proposal and bankruptcy solutions for individuals and businesses.