The importance of having a good Credit Score is of paramount significance. It creates a ripple

effect; therefore any individual having a good Credit Score has the opportunity of furthering their

score much more easily than a person with a relatively low score. Here is a small illustration:

Assume you have got a good credit score, i.e. above 700 on a maximum possible 850

FICO Score. As a result you get to enjoy more credit sanctions which if invested wisely

would result in more income for you. As a result you can apply for more credit which if

approved you again invest in some lucrative business or say capital investment which you

rent out or any other kind of investment where you get to receive a fixed stream of

income. All these money you use to pay back your existing debt and keep the rest in bank

accounts, after drawings obviously. This is great – capitalism rocks and the cycle

continue! Moreover since your income is greater than your expenses (capital repayment

plus interest on the capital), you keep on getting not only richer but also your credit score

improves significantly; this means you get to borrow money at a lower interest rate in the

future because of your brilliant performance.

Now on the other hand:

If an individual’s Credit Score has been lower than the average in their area, city or state,

i.e. below 650 on a maximum possible 850 FICO Score, then we would have seen a

reverse effect. Any debts that they owed would automatically be tougher to pay. If the

economic situation did not improve significantly, for instance, then we can assume the

net income would not improve drastically for that person amongst other factors. Now if

they went to get some credit for investment purposes, it would not only be difficult to

obtain but might not be granted at all. Not to mention the higher than average interest rate

if the loan was granted. Therefore, it becomes difficult to attain higher profits from their

investments compared to the person with better credit score – the climb is steeper for

them.

Although we have portrayed a much grimmer picture for anyone with low score, that does not

mean they cannot alleviate themselves from this situation. In general, they face a greater

challenge than the rest of us but remember there are billionaires with low credit score too. Just

apply the basic of maintaining a good score which is to pay debts in full in their due time.