subject: Credit Score: Is your credit score trying to tell you something? [print this page] A credit score can be a personal early warning system for a financial tsunami about to destroy your wealth base and leave you gasping for air. There is good reason why the lending industry uses a credit score when you apply for a loan. It gives an indication of what type of financial citizen you are, what risk profile you present as a borrower, and an indication of how likely you are to make the loan repayments on time and completely.
If lenders use your credit score like this what does your credit score tell you about your financial position and habits?
The truth is, failures are never (or at least extremely rarely) unpredictable. There are always warning signs. Usually it is that we simply do not see them, or worse, we choose to ignore them. This applies in pretty much any situations, personal relationships, job loss, and business failures.
How many times have you been able to predict an outcome for someone else and you are right you can see he is no good for her but she cannot see it, is not listening, or refuses to believe it until disaster hits.
How many times have you seen a new business open up and you can see it is going to be a failure? It is not in the right location, there are already too many of that business in the area, or the people who run the business are obviously unsuited?
It is true there are unpredictable events like accidents, sickness, and misfortune that do hit us randomly, suddenly, and totally unexpectedly. More often however, the outcomes are a progression and therefore the inevitable result of something over a long period of time. Just small behavioral pattern over a long period can be the cause of a major disaster. Impulse buying for example; going shopping and being caught by something new and shiny, buying it, and then realizing it is a worthless piece of junk and more money you owe on your credit card.
Your credit score, especially if it has been declining over the last few years, may be trying to tell you something about your relationship with money. You can check your credit score and, if it is a poor score, you can do something about it. Learn how to manage your own credit score. Remove the errors and unnecessary items that are damaging your credit.
As you learn more about what makes up your credit score you will also become more aware of how your whole personal financial structure fits together and interrelates. You can learn how to improve your credit score and how that can then be used to reduce the interest rate on other things like your home mortgage, credit cards and other loans.
Sadly, very few people even check their credit score. They are dumbfounded when a loan application gets rejected they didn't see it coming. Lending companies use your credit score to predict how well you manage your finances, why don't you?
Credit Score: Is your credit score trying to tell you something?
