Credit scores are vital in many financial transactions, such as getting a business loan and purchasing a vehicle. A credit score is also a consideration when it comes to employment and legal matters. That’s why it’s a must to achieve and maintain a good credit score as much as you can.
Are you a new graduate or a young professional earning a decent salary for your daily needs? Perhaps you’re the breadwinner in your family or an aspiring entrepreneur who’s planning to start a small business in a couple of months? If your answer to any of those is ‘yes,’ then you should keep reading to learn more about what an excellent credit score can do for you.
Here are the top benefits of having a good credit score:
End A Bad Credit Cycle
It’s important to maintain a good credit score to avoid getting caught up in a bad credit cycle or borrowing money from a bank or lending company and barely paying on time because of various reasons. If you’re already in that situation, you should still strive to get out of it by finding ways to improve your credit score.
It’s possible to increase your credit score by 100 points by changing your spending habits, according to Credit Strong. Credit scores are calculated based on payment history, length of credit history, amounts owed, new credit, and credit mix or a combination of different credit profile types. So given these parameters, you can escape from a cycle of bad credit if you do the following:
- Review your credit report regularly.
- Pay your bills on time.
- Avoid getting new credit.
- Request late payment forgiveness.
- Maintain a low credit card balance.
Boost Your Financial Credibility
When lenders check loan applications, they consider the borrower’s creditworthiness. If you have a poor credit score, the bank or lending company will likely ask you to provide additional proof of income or documents to further assess your capability to repay your loan. You might get approved for a lower amount or, in the worst case, your application will be denied.
To boost your financial credibility and achieve a good credit score, avoid only paying the minimum amount of your credit card balance. Instead, pay off as much as you can by making larger monthly payments or more frequent weekly payments to lower your principal balance quickly and significantly.
With a good credit score, you’ll earn a lender’s trust and enjoy additional benefits such as:
- Receiving proactive offers to increase your credit limit
- Doubling or tripling your reward points because of good payment history
- Getting special discounts and freebies
- Having access to lower interest rates
Of course, having a good credit score is a big plus when it comes to building wealth. If you have a good credit standing, you can easily apply for a business loan to finance your startup.
If you want to build wealth and avoid financial difficulty, you have to do the following:
Use Loans For Their Intended Purpose
Only think about borrowing money if you want to finance a highly profitable small business. This will allow you to expand your operations and earn more so you can easily pay off your loan. However, not all people can manage borrowed money properly. Some end up spending the entire amount on things that have nothing to do with what they took out a loan for. That’s where financial planning comes into play.
Budget Your Money Wisely
Practice good budgeting and stick to it. Resist buying things not included in your must-have list, and don’t indulge in impulsive purchases.
Learn From The Experts
In your free time, you can read finance- and business-related articles such as those on Digital Honey to get more information about attaining a good credit score. Also, in doing so, you’ll discover different strategies on how to better handle your finances. When you keep abreast of the latest news about credit management, saving, and business, you’ll be more equipped to build wealth over time.
Have A Happier And Less Stressful Life
A good credit score, along with adequate savings and manageable credit, equates to financial freedom. You’ll less likely worry about money because you know that you can easily ask the help of banks or lending companies in case you need some funds for emergencies or your business.
It’s not too late to build or rebuild your credit score. You can apply the tips above in order to manage your money well. It’s alright to borrow money, especially if you’re planning to put up a business that can generate good income. However, just make sure to keep your credit score in check and arm yourself with the right knowledge, skills, and tools to attain your financial goals.