Your credit score is the foundation of your financial stability. While maintaining a good credit score is generally important, some situations are more important than the others. Rebuilding your credit to face those situations takes time and discipline. First, let’s understand what those situations are as well as more about how to boost your credit score.
Boost Your Credit Score
Credit Score Explained
A credit score measures a consumer’s creditworthiness. It can have a huge impact on a person’s ability to make major financial purchases, such as buying a car or a house. Also, a low credit score can increase the finance charges and the interest rate on major transactions. The following video explains the concept of credit score more precisely.
Why Boost Your Credit Score
Purchasing a Home
Buying a house usually means taking out a mortgage. Your ability to take out a mortgage hinges upon your credit score. If you have a bad credit history, it is unlikely a bank will approve the loan. Lenders also use credit score to evaluate how much of a credit risk you represent. If you have a low credit score, you’re considered a bigger credit risk and will be charged a higher interest rate on a loan than someone with a good credit score. If you are first-time house buyers, working to boost your credit score is crucial.
Renting a House or Apartment
Your credit score is a critical factor when applying to rent an apartment or home. Good credit is likely to push your application forward in the process over your competition (although you will be paying the same rent). Also, your credit score can factor in on the size of security deposit you have to pay. In addition, you have better bargaining power if you are in a good credit standing regarding other elements of the lease.
Better Interest Rates
Higher credit scores allow for larger amounts of credit at lower interest rates. A lender is more likely to offer a strong borrower with a high credit score a larger amount of credit at a lower interest rate. This is because a person with good credit presents less risk to lenders. The belief is that borrowers with higher credit scores are more likely to work positively towards debt relief than others. The bank or lending institution feels safer and more confident working with someone who has a demonstrated history of responsible financial practices.
Better Credit Card Deals
With good credit, you are likely to get credit cards with the best rewards. Credit cards are positive in your financial history as long as they are used responsibly and do not consistently have revolving debt on them. Settling credit card debt on time and in full is the key to boost your credit score.
If you’re struggling to pay off debt, ACCC can help. Schedule a free credit counseling session with us today.