Many of us are very well aware of managing our finances, but we give little importance to having a good credit score. Having a good credit score is an important part of our Financial life. First, you must know what a good credit score means.
A credit score is a number that defines a consumer’s creditworthiness. The higher the score the better chances to gain multiple benefits out of it. A credit score is based on credit history, several open accounts, total levels of debt, and repayment history, and other factors. Your positive or negative credit habits affect your credit scores.
According to the FICO credit scoring model, credit scores fall into 5 categories:
1- Poor credit: 300-579
2- Fair credit: 580-669
3- Good credit: 670-739
4- Very good credit: 740-799
5- Excellent credit: 800-850
Benefits Of Having A Good Credit Score:
As we are now dependent on our credit cards for our daily purchases. Credit scores provide multiple benefits not only for our daily purchases but it’s beneficial for a lifetime.
1- Low-Interest Rates on Credit Cards and Loans: One of the most important benefits of having a good credit score is that you’ll get a low interest-rate on your debts and loans. As your credit score will be high, you will pay lesser finance charges on credit card balances and loans that means you will not only pay off your loans easily and quickly but will also save a lot of money.
2- More Chances For Credit Card And Loan Approval: Building a good credit score will increase your chances of approval for loans and credit cards. Your good credit score will determine and build a better image in front of the bank when applying for any loan. Having a good credit score will build trust with your lender, that you will repay him on time.
3- Trouble-free Approval To Rent Houses And Apartments: Many landlords before approving you for a rental house or apartment consider your credit score to determine if you are capable to pay the rent or loan on time. However, a bad credit score will reduce your chances of getting a rental apartment. A good credit score will provide you with easy access to rent an apartment and even benefit you to save some money by providing you a discount if your credit score is high.
4- Easy Approval For A Higher Loan: Having a good credit score will enable you to borrow more money or loan as you will be considered who can pay back loans on time due to a good credit score. The higher the credit score, the more chances of borrowing a good amount of money from lenders.
5- Save Money On Utilities: If the homebuyers and rentals have a good credit score then one benefit they gain is that they can save money by not paying a security deposit on utilities such as gas, electricity, and water.
How To Get A Good Credit?
1- Pay Your Bills On Time: This is the most important factor when you want to improve your credit score. When someone will review your credit score, they will surely determine and check how reliably you pay your bills. Paying your bills on time will help you increase your credit score. Whereas any delay in paying your bills will negatively affect your credit score. Good payment history is the most important thing in increasing your credit score.
2- Don’t Open Or Apply For New Credit Cards Unnecessarily: Opening unnecessary credit accounts will negatively affect your credit score. It will also create debt problems for you. Also, opening a credit card will create a credit report and hard inquiry that can also be hard to manage and can affect credit score negatively.
3- Lower Your Debt: Maintaining a good credit score can be difficult when you have so much debt to pay. Having too much debt can also lower your credit score. Make sure to pay all of your debt on time or as soon as possible.
4- Don’t Close Your Old Credit Cards: Your old credit cards can also be beneficial in increasing your credit score. A positive long history of credit accounts influences your credit scores. The credit history of your old accounts will remain on your credit report. The age of your credit accounts is also very important. The older your credit accounts, the more you increase your credit score.
5- Watch For Any Errors: Check your credit report from time to time and detect any mistakes if you see a drop in your credit scores.