Credit scores are inescapable. You will have one if you’ve ever taken out a loan, got a credit card, or bought anything on credit. But why should you have a good one?
Banks and retailers use credit scores to establish whether you are going to pay back a loan. In other words, how trustworthy you are and what the likelihood is of them getting their money back. From buying a new car to getting a mortgage, you need a good credit score to get you lower prices on things like insurance and the cost of debt.
People with poor credit scores can find it very difficult to secure loans. This can make buying a house impossible or getting a new car. Even being able to get a mobile phone contract can be made more difficult by having a poor credit score. If you have a good history of paying back loans and being good for your credit, people are more likely to lend to you and your credit score will improve. This is a virtuous cycle that means that you will be able to have access to the world's financial system. A poor score can exclude you and make your life very difficult.
The benefits of a good credit score include: low interest rates on credit cards and loans, a better chance of getting a loan or a credit card, better negotiating power when it comes to negotiating the terms of any loan, higher approval limits, better insurance, and avoiding security deposits on utilities. The days of being able to avoid having a bank account, and therefore credit score, are over. Our financial system works basically on trust, and your credit score is a large part of that.