Your credit score is the measure of your financial health. Getting a mortgage, car loans, or even financing your studies all depends on whether you have the right credit or not. In some cases, employers even run credit checks on potential workers. Those with bad credit are likely dropped since one’s financial responsibility can be linked to other important characteristics.
Indeed, the whole world is run on credit. With just three digits, businesses can assess your financial situation and whether you qualify for the best financial products. As such, building your credit is definitely one of the best moves you can make to ensure a bright future.
However, the concept of being creditworthy can be challenging to grasp for some people. No worries! Below, we’ll explain what a good credit score is, how to obtain it, and the benefits you can get from it.
What Is a Good Credit Score?
Your credit score can be calculated through five factors: payment history, credit usage, length of credit history, types of accounts, and new credit. Some creditors decide for themselves what a good score is, but the two most commonly used scoring models are the ones made by FICO and VantageScore.
While both models have slight differences in their scoring methods, their credit score ranges from 300 to 850. Of course, the higher the score, the more attractive you look to lenders. Generally speaking, individuals with scores higher than 700 are considered to have good credit scores.
Those with exceptional scores ranging from 800 to 850 are the prime candidates for the lowest interest rates since they typically have histories of no late payments. In contrast, those who fall under poor credit with scores lower than 580 are unlikely to obtain new credit.
If you have just started with your financial journey, learn to be consistent in paying your loans to establish a good record quickly. Moreover, it helps to do your research on how to improve creditworthiness. To help you, visit https://www.crediful.com to learn how to raise your credit and make the most out of your money.
How Do I Improve My Credit Score?
Building a good credit history takes a lot of time and effort. Every transaction you make with your credit card is recorded, which is why you have to be careful about how you use it. Fortunately, you’ll only need to keep in mind these three things to build your credit.
Borrow Only What You Can afford
Owning a credit card gives many people a false sense of security. The first thing to remember when borrowing money is that they have to be repaid with interest. Purchasing items you can’t afford can quickly get you under a lot of debt—a big red flag for future lenders and employers.
Pay On Time
As mentioned earlier, all transactions are reflected in your credit history. Thus, even a single late payment can cause damage to your credit score and may cost you your low-interest rate. It can also cause you to pay the penalty rate and other hefty late fees.
Monitor Your Account
If you didn’t know, you could get one free copy of your credit history every year. Use that to your advantage and understand which things have been beneficial or damaging to your score. Moreover, check for any errors and have them reported immediately to correct your history.
What Are the Benefits of Having a Good Credit Score?
A good credit score will bring you various financial benefits. You will be able to enjoy the best financial options, making you spend less and enjoy more from your hard-earned money. Need a little bit more convincing? Here are some of the reasons why you should raise your credit score.
Get Approved Easily
Individuals with higher credit scores are more likely to get their credit applications approved more than anyone else. Since their history shows how responsible they have been when managing their finances, lenders are more confident that they can pay them back on time.
Better Rates and Terms
Better scores qualify you for lower interest rates. This is advantageous as it can save you a huge amount of money in the long run and can make you pay off what you borrowed at a quicker pace. To add, you can also use your credit scores as leverage when negotiating for better terms.
Most credit cards can give you access to perks and benefits when you have a good credit score. From introductory offers, cashback offers on dining and travel to reward incentives, these special perks will definitely make your spending more worthwhile.
Without a doubt, raising your credit score is a goal for anyone who wants to live their lives comfortably. Your creditworthiness impacts most, if not all, parts of your financial life. Due to this, you must understand its importance for you to fully enjoy the money you’ve worked so hard for.
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