Check out this latest guest post by Dan Miller regarding 4 reasons you should increase your credit score. See his bio at the end of the post.
A good credit score makes one’s life much easier. It paves the way towards financial independence and aids in money-saving endeavors. On the other hand, a shabby history of credit use reflects in less than stellar rating and inhibits your credit management. It goes without saying that there are plenty of reasons to get on the right path to a clean credit rating. There is a variety of prudent steps to take and best practices to adhere to. Basically, to hold the reins over your finances and life, you have to stay on top of credit management and make on-time payments.
Check out these 4 reasons that you should want to increase your credit score.
A Clean Bill of Health
A good rating is the essence of financial health. It enables people to get lower interest rates and negotiate higher borrowing limits. Therefore, it significantly decreases the cost of borrowing money, meaning that you can dedicate more funds to paying off the balance of the loan. Apart from these benefits, a great rating also gives you more options to choose from in terms of borrowing funds.
Banks are not the only institutions that take your credit rating into account. It can also affect your ability to rent a car, get a mobile phone contract, or even land a job. Moreover, I found out that a clean credit rating helps when you apply for insurance. Namely, car insurance companies often charge higher rates to customers with poor credit ratings as they tend to file more claims.
A Penny Saved is a Penny Earned
A credit score is a three-digit number that designates how likely you are to repay a loan on time. It is rooted in the information present in your credit report, a document that encompasses your credit history. I order my credit report for free and I would recommend you to do the same every not and then. In case you are familiar with basic terms, educate yourself.
Before that, there is a host of steps you can take in order to turn the disadvantaged situation around. First off, it is highly advisable to have a savings account. It acts as a buffer for financial shocks, allowing you to handle emergencies and pay bills on time, ultimately leading to a higher credit score. Experts argue you should try to set aside a fixed amount of money (a certain portion of your income) each month and I found out that this method really works.
Related: Crash course in your credit report
On the Ball
One of the key steps is to commit to paying at least the minimum amount each month. Delinquent payments or those that do not involve a minimum specified amount have an immediate negative impact on your score. Furthermore, strive to keep your balances low. Mind the utilization rate, which is also called balance-to-limit ratio. Keep in mind that closing accounts can reduce available credit limits as well as the utilization rate.
Avoid applying for multiple credit accounts in a short time. This kind of risky behavior is a red flag for lenders. Besides, every time you apply for an account, a new inquiry takes place and potentially undermines your good rating. Thus, seek credit only when it is necessary and do not bite off more than you can chew. Sound credit management sends a positive signal to lenders and demonstrates that the risk of doing business with you is bearable, to say the least.
In a nutshell, you have to display good credit habits and manage your finances well over a long period of time. This is no cakewalk. Believe me, the energy you are going to invest is a drop in the bucket compared to the positive influence that a good credit rating has on various financial aspects of your life. Just bear in mind that the more severe your past financial difficulties, the longer it takes to mend your credit history and score.
Pay to Play
A good credit rating plays a vital role in your financial life. It is a powerful asset that empowers you to lower the costs of borrowing money and ramp up your negotiating power with lending companies. In addition, it pays dividends in many small ways, such as not having to come up with a security deposit when signing a mobile phone contract. So, attain financial freedom and save for a rainy day. Bring your account current and always pay as agreed. Do not make the same mistake as me and prevent the past from coming back and haunting you when you least need it.
Are there any other reasons that you want to increase your credit score?
Bio: Hi, my name is Dan. I’m from the greater Sydney area, born and raised in Liverpool, Sydney. After high school, I went to the Sydney University where I got my masters degree in banking and finances. I worked as a payments officer for nearly ten years in banking and international payments in the Australian banking sector. My hobbies include soccer, running and watching Netflix.
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