Advantages and Disadvantages of Credit Ratings
Credit ratings can work for you and they can work against you. This can be explained in a few different ways as you seek to learn more about your creditworthiness.
Advantages
Knowing that there are consequences if you do not pay your bills on time-particularly loan payments-it can be an incentive. It can cause you to work hard to continue to fulfill all your obligations.
It also just simply makes you feel good to know that you are taking care of business. When your credit is good then life is good. It is a great guide to use to determine whether you are eligible for housing and car loans as well as lower-interest credit cards.
All in all when you have good credit you receive better loan and credit card repayment terms. You also are usually able to secure bank accounts from more prestigious institutions.
One a more corporate level, credit ratings makes a difference too. Businesses can use this as a tool to help establish creditworthiness and to make investment decisions.
On the national and international level, countries who have a good credit rating are able to easier borrow from other countries. No matter what more options are available to individuals, institutions, or nations with the best track record.
Disadvantages
Credit ratings can work against you even if you are normally a very upstanding person. For instance, say you are in an accident and are suddenly disabled. You might lose an income because you can no longer work. In the process, you might start to accumulate bills.
In other cases, such as that of having a mental disability a credit rating can work against you as well. Your costs for treatment even if you have insurance could totally break you.
Credit ratings can also work against you in the event you are taken advantage of by a thief who steals your identity. It could be for a variety of reasons that a person may take your financial and personal information.
They may use it to secure a house or car loan. They might be using your identity to get a credit card or even to get phone or utility service. Worse yet, they might apply for a job in your name or even apply for a home loan.
Another disadvantage is an otherwise good person just for whatever reason may be going through tough financial times. This can set a person back even if they used to be faithful with obligations in the past.