Your Good Name Is a Valuable Commodity
It is important to create a good impression. It is as valid a statement when it relates to new relationships and job applications as it is for finance. Your credit score is a reflection of how you stand as far as the financial community is concerned and the better your score the more likely it is to regard you as a good risk. The result should be your ability to borrow money at a more favorable rate.
Everyone starts with a clean slate and builds up their score, or sees it fall depending upon their interaction with their creditors, ranging from their utility providers and bank to their telephone network and credit card companies. Someone who can always pay on time will develop a good reputation and that will be reflected in their credit score. Those who fail to make timely payments will suffer.
Take for example loans. The rates that are charged vary depending upon the applicant. Those with a good score will find ‘cheaper money’ but that is not to say that loans cannot be obtained by those whose credit worthiness is doubtful. There were many victims during the recession and plenty of people who had never faced serious financial problems suddenly found themselves out of work and unable to pay their bills. Fortunately there are companies that will still grant loans to such people, albeit at a slightly higher rate, as long as they have regular employment and the apparent ability to repay by instalments. They base their decisions on the future rather than the past though that does not mean that striving to improve a damaged credit score should not be a priority. Successfully repaying a loan & up to 5000 cash approved now, even if it was more expensive than the norm, will improve a respective credit score so a similar loan will be cheaper in the future.
How can you ensure your credit score will grow? • Payments. Your score is made up of a number of factors and paying everything on time will account for 35%. • Using Credit. If for example you have a couple of credit cards but you are only using a small percentage of your credit limit at any one time then your credit to debt ratio is good. A good ratio is a real positive because credit utilization accounts for a further 30% • A further 15% comes from the age of your credit. You should never close accounts, bank or credit card because the more information is available to lenders the more positively they will feel towards you. If for example you pay off a credit card balance with a consolidation loan you should retain the card because it also helps your credit to debt ratio. Spend on the card by all means but always pay off your balance in full at the due date. • Diversification. If you have a number of loans, real estate mortgage, car and credit card for example and are handling them all successfully that is a further 10%. • The final 10% comes from the frequency or amount of applications you make. Too many in a short time can be viewed negatively; is it a sign of desperation? You can check your credit score at any time. It will not change radically in short periods unless something really dramatic happens. You can grow your score over time by never missing payments.
If you have a poor credit score your chances of a competitive mortgage are reduced. A mortgage is positive debt because it is a means of your building up an asset because over the medium to long term real estate should appreciate. Mortgages are available over up to 30 years so the lower the interest rate you can achieve the less you will be paying over the life of the mortgage.
Financial institutions need to make money. If you have a good credit score these institutions are actually likely to compete for your business because you will be perceived as a good risk
Purchases ‘’Out of Season’’
This is a matter of doing your sums. For example if you wanted to buy clothes for winter in the spring prices may be much lower than they are going to be in six months. If you have good credit you may be able to buy bulk and save yourself money as long as you avoid paying interest on your purchases.
With a good credit score landlords will regard you as a good risk. It means that you are likely to be able to negotiate a good lease on a property.
You may well find that employers refer to your credit history as part of their assessment when considering you for a job. It may not apply in every case but if you are in a professional field or indeed in the financial services industry a good credit score is essential.
Far too many Americans have struggled with their finances in recent years. The level of credit card debt across the Country is extremely disturbing, particularly because it incurs such a high level of interest at the end of each statement period. Those who can get themselves out of this debt and strive towards improving their credit score will find that doors will open towards a better financial future. It may take plenty of work but that is no reason not to try.