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Topic: Credit

4 Current Reasons To Care About Your Credit Rating

Are you someone that lives strictly on cash, and don’t have loans or credit cards? Some may say that living a cash only lifestyle, and dismissing the relevance of a score that is somewhat dependant on how you are managing debt, is the more healthy way to go.

However, your credit report and score have become more that just a measurement of your credit usage. It can now also be a determining factor for some employment opportunities, utility and insurance rates, and the interest you will pay to refinance a loan or borrow for things like a car or furniture. Where your score lands on the credit score rating scale matters. Regardless of your inclination to live on cash or credit, your credit rating is becoming the key that can unlock doors when you most need it.

Here are 4 reasons to care about your credit rating.1. A good credit rating means you will pay less to borrow money.
Even with the best intentions, budgeting, and expense control you may need to borrow money at some time in your life. For example, purchasing a house will typically require some amount of borrowing for most people. The amount of interest you pay on a home loan will make a dramatic difference over time. Your credit rating will determine what rate you are offered.
Example: $50,000.00 loan for 30 years fixed rate
At 7%: $332.00 monthly payment and a total of $69,754.45 interest paid
At 5%: $268.00 monthly payment and a total of $46,627.89 interest paid

2. A good credit rating is becoming your character reference.
The days of having your minister, boss, local sheriff, and even your mom vouch for your character are gone. Today, we need to accept that, in more cases then naught, our creditworthiness is judged by our credit score numbers.

Keep in mind that your credit history and score can affect rates you are quoted by utility and phone companies, for example, as well as your ability to rent an apartment.

3. A good credit rating is like a safety net during economic hardship.
You may comfortably live on a cash basis, but the reality is that economic hardship can hit anyone today. Many people are faced with circumstances they never thought they would have to deal with. In the event you need to borrow money on a short term basis during a personal hardship, having an excellent credit rating could be the safety net you need in order to get access to cheap money for a short period of time.

4. The credit score rating scale: a few points makes a big difference.
The Fair Isaac Corporation maintains a “credit score rating scale” of various creditworthiness categories. Within each category is a range of scores. For example, on the credit score rating scale there are categories listed as 600-649 (12% of us), 650-699 (15% of us), and 700-749 (18% of us). You’ll have a better chance of receiving better rates as you move into higher categories. As you can see you could be in a position where only a few more points could put you in a higher category.

On their website, myFICO.com suggests the following 4 steps as a starting point for strengthening your credit score:

• Start by getting your current credit picture.
• Educate yourself about credit and credit scores.
• Set a plan that focuses on fixing your specific credit problems.
• Keep tabs on your credit so you know if your plan is working

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Here are a few of the May / June 2011 stories:
-Jimmy Carter's Money Memories
-Quarterback Pat White: Poster Child For Plan B
-Bret Michaels' 4 Greatest Career Traits
-The 7 Deadly Credit Card Sins

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The Quarter Roll is published to provide personal insights and opinions on everyday ways of saving and managing money, budgeting, and reducing debt. The Quarter Roll does not give professional accounting, legal, or investing counsel. The ideas, examples, and advice presented on this site are solely the opinion of the authors based on his or her personal experiences. All photos courtesy of The Quarter Roll, iStockphoto, or Dreamstime. © 2007 - 2011 All rights reserved. Bowman's Money College publishes The Quarter Roll Financial Entertainment™ and is a member of the Monroeville Area Chamber of Commerce.

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The Quarter Roll is here for one reason: to provide a forum where we can collectively learn and share strategies that allow us to create freedom and quality in our lives. One way to do that is to make better, more informed decisions about your personal economic situation and your money: how to save it, earn it, and get more value for it. We want to eliminate the worry so many people have about their personal financial situations; we will continue to do that through insightful and entertaining stories.