Importance of Maintaining A Healthy Credit Score
You will need to borrow money at some point in your life. Maybe you need a car or you’re planning on buying a home within the next year or two. Since most people don’t have that kind of cash lying around, you’ll turn to a bank for financing. The greater your credit score the easier it is to borrow money from a lender. However, if your score is low you may end up with an uphill battle on your hands. Thankfully, there are many ways to improve your credit score relatively quickly
Living Within Your Means
Many people fall into financial problems and have difficulty paying their bills because they don’t live within their means. In order to maintain good credit you have to learn to use your money wisely. If you enjoy eating out, reduce the number of times you do it each month. If you like nice clothing and expensive things, save for them and pay cash instead of purchasing them on credit. Once you learn how to handle your money you’ll find that you suddenly have money left over each month to enjoy a night out, guilt-free.
Pay Debt on Time
There are several contributing factors that lenders take into consideration before either approving or denying you for a loan, with your payment history standing out as the most important. Because of this, the fastest way to start raising your credit score is to pay your monthly bills on time. If you fall short one month, do everything in your power to come up with the money you need to remain current. You can sell things, take on odd jobs or apply for a small loan from an online lender, preferably trying to find loans that offer advances. The reason for this is to avoid a lengthy delay so that you can make your payment by the due date.
Reduce Your Debt
Another thing banks look at is your debt-to-income ratio. If you have several credit cards and they are maxed out this raises a red flag that you are living well above your means. Luckily, you can decrease your debt by paying down the credit cards and reducing the balances to less than a third of their availability. Don’t close your accounts, especially the ones that you’ve had the longest. The reason for this is that banks also check the length of your established credit, so a card that you’ve had for a few years can actually help to prove your credit worthiness.
Financial Pitfalls of Having Poor Credit
Aside from getting denied for traditional bank loans, having poor credit can cost you a lot of extra money and deny you opportunities to secure better interest rates and access to the best companies. Many companies now pull up a credit report before offering their services. This can affect you getting into an apartment in a nice neighborhood, getting car or home insurance, and cause you to have to pay a deposit for household utilities like gas and electric before companies are willing to turn them on.
A credit score is just a number. However, it’s a number that banks use to their advantage. By improving your score you’ll be able to shop around for the best interest rates and as a result, pay far less over time.