Financial advisors would always suggest abiding by the three key financial safeguards to attain financial security. They are:
- Save money as an emergency fund
- Never spend more than you can afford
- Pay your debts on time
In addition, experts today also recommend keeping your credit scores as high as possible. A credit score is an important reflector of your financial health. Having good credit scores helps to unlock savings and benefits which includes access to credit cards and loans. Let us look at the reasons why you should be maintaining a good credit score.
Save Huge on Interest Rates on Big-Ticket Loans
If you are applying for a large loan to purchase a car or a house, a small difference in interest rates translates into substantial money. It could be thousands of dollars over the period you pay off your loan. If you have a high credit score, you can easily secure a loan with the least interest rate available in the market.
Lucrative Terms and Availability on Loan Products
A high credit score gives access to almost every loan or credit card product out there in the market. You can shop around and compare rates more effectively. It also entitles you to get the best terms which include better dollar limits which can make it easy for you to finance your big purchases.
Access The Best Credit Card Offers
You get access to the most rewarding credit cards if you maintain a high credit score. These include low-interest rates, better rewards, lucrative discounts, and travel points. Some cards also have features like 0% APR on purchases and balance transfer offers. These often reflect substantial savings over time.
Insurance Discounts
Some insurance companies may turn down their products if you have a low credit score. However, having a high credit score qualifies you for the lowest insurance premiums on car insurance.
Better Housing Options
Some landlords often consider credit scores before making a rental agreement. They do so to evaluate if you are financially trustworthy. High credit scores make it easier for you to get approval for an apartment or home rental. You may even save money on a security deposit.
Entitles You To Security Deposit Waivers
Many utility companies consider credit scores to determine your ability to pay bills on time. Having a weak credit history might mean you have to arrange for a security deposit before initiating a utility service.
How to Improve My Credit Score?
Credit Repair or improving the credit score is possible by making several changes to your financial behavior. Each individual has several credit scores, but the basis for each of them is usually the same. Hence, if you adopt strategies to improve your credit scores, the effect will be seen everywhere.
You might wonder if there is a secret that can quickly improve your scores. Although you cannot improve it overnight, it’s quite simple and you merely need to do the opposite of what made its slump. Every scoring model gives different weight to the factors affecting your score, the most common factors usually include the following:
Payment History
The most important factor considered by all rating agencies, it records the number of late or missed payments you made. If you have been failing to make payments or delaying your payments, your credit score would go down. On the other hand, if you have been paying your bills on time, your credit score will be higher.
Credit Utilization Ratio
It is the amount of credit you have used against the total credit available to you. Maintaining a low ratio results in a higher credit score. Thus, you should always aim to keep this ratio below 30%. For maintaining an excellent credit score, this ratio should be well within 10%.
Number of Accounts
Rating agencies consider the number of credit accounts you have and how many of them carry balances. You can maintain a high credit score if you have more accounts that do not have balances than the ones carrying a balance.
Credit History
The frequency of how often you use credit is also a parameter that most scoring models use. The average age of all your open accounts is considered here and having a long credit history results in a better credit score.
Credit Mix
The type of credit you have is also considered while calculating your score. It includes credit cards and other loans. You should maintain a good mix of different types of credits to have a high credit score.
Hard Inquiries
While applying for a new loan or a credit card, the lender checks your credit score. A hard inquiry is one parameter that is checked before approving a credit account. If you have too many hard inquires, your score is bound to be lower.
If you are unable to maintain a good credit score or having troubles when applying for a loan, consult Super Credit Repair. The team of professional have been helping residents of Clearwater and Pinellas County and guiding them to improve their credit scores over the past several years.
Picture Credit: Freepik