Having a good credit score is nice, and having a great credit score is even better. This will allow you to make whatever purchases you need, whether for business or pleasure. But, why is a credit score important for financial decisions? Well, your credit score tells others how well you deal with debt and repayment.
If your credit score is good, then you will have a lot of open doors to take out business loans, take on a mortgage, or make a big purchase for your family. So, let’s look at why you need a good credit score.
Why is a Credit Score Important?
Your credit is a huge part of your future, and having a great credit score will allow you to have better financial freedom as you age. A good credit score will show loan officers and banks that you are a low-risk applicant, which can help you get loans for starting your own business or allow you to own a home.
As you advance in your career, you will bring in more money, which means that you could afford to buy more expensive items. If you want to spread that amount out between monthly payments, then having a credit card that has a high limit will allow you to do this. But you can only get one if you have a higher credit score.
And, one of the biggest issues with having a bad credit score is not being able to own a home. This is one of the best investments that you could make, and if you don’t have the credit score to take out a home mortgage, then you won’t be able to do that.
What is Considered a Good Credit Score?
A credit score can be anywhere between 300 and 850, which is the total range. A good credit score is typically considered to be in the middle range, around 400 to 600. This is a moderate amount that is achievable for those who don’t make that much a year, and who still have debt that needs to be paid off.
This can be achieved by keeping track of your spending and ensuring that your payments are on time. Having a good score will allow you to make more decisions about what you want to do with your finances in a way that you can’t if you have a lower score.
And, if you, like most people, are tired of working for someone else, then you can get a business loan to help get your small business up and running. This means that having a good credit score opens doors for you to make more money in the future.
Other Benefits of a Good Credit Score
We have covered a few benefits that come with having a good credit score, but we have yet to discuss them all. So, let’s talk about the other benefits that you will have by increasing your score.
When you get any type of loan, from a car to a business loan, you will have to pay interest on it. This ensures that the bank is paid for its services and makes money off of the loan. This is a percentage that is often calculated by your credit score, which comes from a credit reporting service that averages out your credit history. With a higher score, you might be able to get a better deal with the interest rate being lower.
This is because you are not a risk and the bank can see that you will pay it off. A few percentages might not seem like much, but over time it adds up. So, even if you go from a 3% to 2% interest rate, this will knock money off your payments down the line.
If you can get a better rate for your car, home, and business loans, then this can make a huge dent in the amount of debt that you have owed if your credit score had been lower. And, as your credit score rises, you can refinance those loans with your new score to get an even better rate a few years later.
Your credit history is a big part of your finances, and having a good credit score can make it much easier for you to have the financial freedom that you want in the future. Don’t settle for a low score that won’t allow you to buy a home or take out a sizable loan. This will only lead to more financial issues in the future.
Cutting down on your spending and keeping your payments on time will help you raise your score even higher, so you can do whatever you want with your money. Even if you don’t want to buy a large home and fancy car, a good credit score can help you lower your interest rates and get out of debt faster.
This infographic was created by Stein Saks, a credit reporting lawyer