Borrowing Money 101: Why Does Your Credit Score Matter?

Credit Score

Taking out a loan these days is just as simple as withdrawing cash from an ATM. Loans are often accessible, quick, and hassle-free transactions. But these conveniences are not what every potential borrower experiences.

Sometimes, filing for a personal loan is taxing and adds more weight to their financial burden. Little do they know that one factor is a primary reason for these differences.

The convenience for some borrowers and the inconvenience of others all fall to their credit score. It is a familiar term, but not everyone understands its importance.

Here, we will explain why your credit score matters and other helpful information.

Credit Score in A Nutshell

A credit score is technically a numerical expression of any potential borrowers’ creditworthiness. It is a result of a credit report analysis based on a persons’ credit files sent out to credit bureaus.

The credit score is represented by three-digit numbers. According to the FICO scoring model, the lowest credit score is 300, while 850 is the highest.

Where You Can Check Your Credit Score

Checking your credit score is possible available online. There are many resources where you can check your credit score as there are many credit reporting agencies that either sell the report or give them for free. You don’t have any excuse for not being able to check what your current credit score is.

If you are planning to take out a loan in the future, consider checking your credit score. This is the best way to check your credit history before making a move.

Moreover, it will be helpful if you are conscious of your previous loan applications. Truthfully speaking, a bad credit rating can affect your ability to get a loan in the future.

Bad Credit Score VS No Credit Score

You might have already heard some financial experts saying, “no credit score is as bad as having bad credit.” The truth is both have a negative implication for any potential borrowers.

For borrowers with bad credit, they can still apply for a loan and be eligible for approval. However, it is expected that there will be high-interest rates, and your lender will probably make a thorough investigation of your credit history.

This is possibly true as these types of borrowers are potentially tagged as high-risk borrowers, and lenders are wary of them. However, no credit score borrowers, often called “credit invisible” borrowers, face the same challenges as those with a bad credit score.

Since they are indeterminable by lenders and banks because of the lack of evidence and reports of their credit history, they are also considered as potentially high-risk borrowers.

Rebuilding Your Credit Score

If you ask various financial experts, it is way better to have no credit score than to have a bad one. It is easier to start from scratch and make a good first impression rather than rebuilding a bad reputation.

For borrowers with bad credit scores, you need to be patient with the lenders if they show a bit of skepticism during your loan application. Also, it will be helpful if you start removing bad habits when you take out a loan, such as missing the scheduled repayments.

You can also further check your credit reports as there’s a possibility that errors are being made. You can file a dispute report on the errors found, as incorrect details can significantly damage your score.

For borrowers with no credit history, you just need to be careful with your every move since there are lenders who will be wary of these borrowers. If you happen to get approved, make sure that you pay on time. That’s what matters most. Moreover, only take-out loans that you can handle.

To build a good credit score, try small and short-term secured loans. You can try opening a secured credit card as they are easy to start with. Just make sure to choose an issuer that reports all your credit history to every major credit-reporting bureau.

When Does A Credit Score Not Matter?

Well… hardly ever! The truth is your credit score matters almost all the time. If you reach a good score of 700 and above, you are entitled to better benefits. Your good credit score can be used as a leverage for you to get into great deals.

Even employers sometimes look into credit scores of job applicants.


Even though taking out loans has become an easy process, potential borrowers experience differently because of the difference in credit scores.

Credit score plays a significant role when you plan to take out a loan. It is the decisive factor in whether or not you will be approved for your loan.

One thing every borrower should remember is that a good credit score lets you experience better benefits. Taking out a loan requires diligence, and one should be responsible for handling and managing it efficiently.

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