Financial institutions use credit scores to determine whether a borrower qualifies for a loan, what type to offer, and at what interest rate. They also use credit scores to determine credit limits. Having an excellent or very good credit score is beneficial as borrowers can choose from a variety of products. They are also more likely to get favorable terms. This is true for most products borrowers apply. For example, people with poor credit may not qualify for a platinum cashback credit card or another card with a preferential interest rate and perks. Instead, they may be offered a secured credit card.
Banks and credit unions are not the only ones to use credit scores. Other entities such as governmental departments, insurers, and landlords also pull credit reports before making a decision. Even mobile phone companies run credit checks.
The good news is that positive information is reported, and there are many ways to build and rebuild credit. Making timely payments on credit cards, paying off existing debts as quickly as possible, and canceling and updating accounts are good ways to improve one’s credit score. Getting a landline and timing loan applications ways to build credit as well. Keep in mind that utility companies, credit unions, banks, and other entities compile information on transactions and payments toward phone and energy contracts, mortgages, store cards, etc. This is why, it is important to make timely payments.