Taking into consideration your financial account, net worth and credit score are probably two things you need to care about the most. Now, while a credit score is relevant when you are applying for a credit loan, it doesn’t end there, end certain employers might even take a look at your rating before your job interview.
It is clear that keeping a good credit score can be beneficial in multiple ways – with the main one being that you will be able to get a loan from a relevant and a 100% safe source, and not a lender that offers you the so-called instant loan with no prior checks.
On the other hand, net worth is basically determined by deducting existing liabilities from your assets. Assets include cash, cars, real estate possessions, etc. while on the other hand liabilities are mostly in form of mortgage debts and bills. Now, the bigger your net worth is the better standing you are – but how and does it affect your credit score? Let’s go ahead and take a look.
How Is Credit Score Determined In The First Place
As mentioned above, credit score is something banks and other creditors consider when you apply for a loan. On the other hand, there are certain banks that do additional checks to find out more about your previous payment behavior, and if you were a part of any fraud. And while ChexSystem can provide creditors with relevant information in some cases it blacklists people with no adequate reason – lucky for you, there are banks that do not use ChexSystems and that could be of great service.
First and foremost, the credit score consists of your payment history, account data, previous creditors and other relevant information related to your loan application such as address and a Social Security number. On the other hand, the credit score as it doesn’t show your income or savings accounts balance – saying this net worth shouldn’t have an influence on your credit score. But is it really like this?
What Is A Good Credit Score
A credit score is determined using the data and payment history provided which means that your current assets shouldn’t affect your rating. Now, credit scores are numerically stated ranging from 300 to 850. The FICO score of 850 is the one a good potential debtor should have.
Why Is Net Worth Still Important
While net worth doesn’t have a direct impact on a credit score it still plays a significant role in your chances of getting that loan and financing your new project. When it comes to bigger loans, such as a home loan, the bank or a potential creditor may ask for your statement of income and proof of assets. A list of the assets you have may assure the bank that you will be able to pay off the debt at any given moment, and if you don’t want to they will be able to execute it by requesting the sale of certain assets. As you can see, net worth is not only there to show the public how successful you are.
Both credit rating and net worth play their one roles in your financial statements, and if you are applying for a loan you want that both of these are top notch. And while net worth as it is, is not directly included in a credit score calculation it can be a determining factor in your chances to get that loan.