Ever looked at your credit report and wondered if it’s good enough? More importantly, what is “good” credit and how can you attain it? Like everyone else, you need your credit report for services like credit cards or loans. Depending on your rating, you may have earned a great or terrible deal for those. That’s why good credit scores are crucial to peoples’ financial health.
The three digits on your report indicate how much lenders and institutions may trust you. On the other hand, distrust will strain various aspects of your life. Fortunately, there are numerous methods to build your credit. You may do them alone or ask for professional help.
What is a Credit Score
Your credit report is a detailed record of your credit history. It lists your bank accounts, open credit lines, your owed amount, and the corresponding time and location. In addition, it shows your payment history, showing how punctual or tardy you are with payments. What’s more, all that information is summarized and gauged by a three-digit score.
Otherwise known as the credit score, it measures your likelihood to repay loans on time. Specifically, it analyzes info from your report to assess if you will repay the loan 24 months after. Of course, lenders want assurance that borrowers repay them, so they rely on the rating when offering services such as student loans.
What is a Good Credit Score
Credit scores are measured by credit scoring models like FICO scores. Usually, system scores range from 300 to 850, where a good credit score is 690 or higher.
Thankfully, most people are in that good credit score range. However, take note of financial institutions that may have their own scoring systems.
Benefits of Good Credit Scores
You need your credit report for many trivial and essential services, so a good score is crucial. It will grant you tremendous negotiating power for loans and credit card applications. After all, lenders will assume you can return their money, so they’ll be inclined to soften terms like interest rates and credit limits. In fact, you may be denied some services for having poor credit.
Read More: Learn How to Build Credit
Get Approved for Apartments Easier
Landlords analyze credit reports when offering space in their apartments. Similar to lenders, they want assurance that you will pay rent in full. Since a good credit score signifies your trustworthiness, property owners may grant you an apartment easier.
Poor credit may result from late rent payments or evictions, records that discourage landlords.
Pay Less for Car Insurance
Your experience when buying stuff and availing services may vary depending on your credit rating. For instance, auto insurance may become costly due to a poor score.
Insurance companies use your credit report to assign you an insurance risk score. Consequently, a good rating will make car insurance more affordable.
Buy Smartphones More Affordably
In addition, you will pay more for a smartphone due to bad credit. Providers may offer you pricey, pay-as-you-go contracts for more expensive phones, instead of an affordable contract.
Conversely, a good rating inclines them to forego charging a security deposit. Even better, you may receive a contract with a discounted purchase price.
Facilitate Job Application
As we’ve mentioned, a credit report gauges your trustworthiness, so employers use them when selecting job applicants. If you responsibly and diligently fulfill your payments, then you may be trusted to perform office tasks well.
Having a good rating will mean having better chances of snagging the job.
How to Build Good Credit
You still have hope to improve your credit score despite your bad report. If you haven’t gotten your copy recently, you should get yours before proceeding.
You may get your free credit report from online sources. Building your credit starts with you, but you may ask for certain services to help.
Pay Balances On-Time
First, the most crucial action toward good credit is diligent payments. Prove that you can pay balances on time, and the score will eventually rise.
Avoid opening more credit accounts as it may cause your score to drop. Keep your old ones open, and use them constantly but frugally to stay current.
Read More: Debt Strategy Options
Reduce Credit Utilization
This action maintains your credit utilization, the ratio between your balances and your limit, at a minimal level. This is a factor that may reduce your rating as it rises. You may help your credit utilization by your debts are lower than your credit limit. Minimal utilization means you don’t borrow money excessively, so it adds points to your rating.
Take Out Credit Builder Loans
You may even get a credit builder loan to raise your credit score. It’s a borrowed amount that you are supposed to repay like a usual loan.
Unlike those, you will receive the money again after successfully repaying. It aims to give you a good payment history that boosts your credit rating.
Use Debt Reduction Strategies
If you’re struggling with poor credit, it could be due to excessive debt burdens. Thankfully, there are numerous methods available including debt consolidation loans. They pay all your debts in a lump sum, then you will repay that total along with a low-interest rate. This technique may help you manage your debts and facilitate payoff.
It usually applies to credit card balances that can be consolidated through balance transfer cards. Those usually have a 0% introductory period, so you can pay your debts without interest. You may even ask for debt settlement if you’re in dire financial straits. If not, you may request guidance from credit counseling.
Use all the methods available, and don’t be afraid to ask for help. There are free online sources that may teach you debt payoff techniques like the debt snowball and the debt avalanche. If you’ve exhausted all your options and haven’t gotten any progress, there’s always bankruptcy. Take note that filing for bankruptcy may hurt your report for at least ten years.
Check if you qualify in two simple steps
- Step 1 –
- Step 2 –
When Do I Plan To Start The Debt Snowball?
If you have an emergency fund of $1,000, then you can start writing your debt snowball sheet. You need it for emergencies such as a flat tire from sinking you further into debt. Then, you can start the snowball method.
Now, organize your debt snowball worksheet by listing your non-mortgage debt from smallest to largest with your spouse, if you have one. Then discuss how you can pay the smaller amounts. For instance, you may look for side jobs or sell stuff you don’t need. Then, follow the steps mentioned earlier, and soon you’ll be free from interest rates and your credit score will show it!
No matter what method you use, the best way out of debt is discipline and hard work. Don’t buy stuff to impress the Joneses. Remember that you don’t need to keep buying stuff to impress people you don’t need with money you don’t have to impress people you don’t like. Live below your means so you can have enough for emergencies.
You may check out blogs for more info regarding the debt snowball and other financial tips and advice. Try a Debt Snowball Calculator to guide you in paying off debt using the snowball method.