No one ever really tells us why we need a good credit rating. We hear the terms credit score and credit rating, but they always apply to someone else. Maybe you think it isn't important because you're not in the market for a new home, or any big purchase at the moment. The fact is your credit score is important regardless of your situation.

Your credit score and any loan, whether it be secured or unsecured, are intimately tied together. The interest rate you pay on any loan and whether you are even eligible to take out a loan is determined by your credit score. If you have a low credit score, you are a higher risk for creditors and they charge a higher interest rate in order to mediate this risk.

Not only are interest rates affected by your credit score, but other non-interest types of necessary expenses are also affected. For example, the cost of insurance; your ability to rent an apartment or secure utilities without having a co-signer; and in some cases it can affect whether you will be selected for a job. While these may seem to be necessities that should not be affected by your credit score, more and more your credit score is related toward how responsible and reliable you are in being able to manage your money.

A few points increase in your credit score can make a big difference in how much you pay in interest. The less you pay in interest, the less debt over time you will incur. You can save thousands of dollars just by increasing your credit score.