Your credit rating plays an important part in your ability to borrow money. This score is calculated by using information from a number of different sources. If you have never borrowed money before and have no history of repayment, it will negatively affect your score. Similarly, people who have a history of missing payments on their loans or making late payments will have a lower score.

You Are Less Likely to Get a Loan

People sometimes do not realise how important their credit score is until they need to borrow money from a bank or another financial institution. Most lending agencies do a credit check when you apply for a car loan or mortgage. They will refuse any applicant who has a score that is below their standards. This is one of the reasons why most individuals try to hard to keep their score above a specific value.

You Pay More Fees and Higher Interest

Your credit rating also affects the type of interest rate that you are able to get. Lenders calculate their interest rate in order to make as much money as they can on the cash that they offer. They also aim to make enough money to cover their losses if something goes wrong at some point during the life of the loan. Credit Rating Affect

People who have a high credit rating will usually be able to get loans at a more affordable rate. Lenders offer lower rates to people with higher scores because they know that these individuals can easily get money to borrow anywhere. They also know that they are much more likely to get back all of their principal, so they are taking less risk with clients who are in that group.

Individuals who have poor credit often find that when they get to borrow money, lots of fees are attached. In addition to that, the rate of interest that they are charged is exorbitant. Lenders charge these high rates because people with bad credit are often more willing to pay higher interest to get cash. It is hard for them to pick and choose the loans that they want and any that are available often charge similar rates and fees.