Your credit score acts as a report card for your financial responsibility. It is an indicator of your ability to pay off loans and other acquired debt.
Whether or not you are satisfied with your current credit score may determine how much you should do to improve it. However, it is always a good idea to work toward raising it.
Here are the top five reasons why strengthening your credit score is important:
- Purchasing a new home or renting an apartment
According to Top Ten Reviews, one of the primary reasons you should raise your credit score is to position yourself in a positive way when buying a home. If you are interested in investing in real estate, you will want to ensure you will be approved for a home loan and that you qualify for the lowest possible rate. The lower your credit score, the higher your interest rate.
Even if you don’t think purchasing a home is the right option for you, applying to live in apartments also requires a credit check. Landlords want tenants who have demonstrated dependability in the past, and a credit score serves as evidence. Ensure it works in your favor, and keep your credit score as high as possible.
- Your romantic relationships
Nothing kills the mood like a terrible credit score, right? Well, sort of. According to U.S. News & World Report, a bad credit score can have rippling effects when it comes to your personal life. Just like emotional baggage can cause issues with your special someone, so can financial baggage. When purchasing larger-ticket items in unison or taking out loans, your credit score may impede your lover’s ability to qualify since lenders consider both you and your partner’s credit history.
- Starting a business
If you are thinking about starting your own business, you may want to think twice about it if you know that your credit score isn’t optimal. To secure small-business financing you need to demonstrate that you can handle the finances of a new business well. A good credit history can show lenders that you are capable of making the proper financial decisions and ensuring optimal success.
- Buying a car
Another reason you will likely want to improve your credit score is for when you decide to invest in a vehicle. When buying a car, it is very common for consumers to take out a loan to finance their decision. If you want to take out a loan for a car, it will be much more difficult if your credit score is lower than what the lender deems acceptable.
In addition, you will likely need to supply a more substantial down payment than if your credit score was good or excellent.
After purchasing the vehicle, your insurance may also be higher. Good credit will help you save the highest amount of money when financing this purchase and all the additional expenses associated with a new car.
- Bad scores are hard to forget and improve
If you find yourself in a situation where you have a poor credit score, it is very difficult to improve your score. Typically these numbers are far easier to drive down than they are to bring up, so staying on top of them and maintaining responsible spending habits is critical.
Your credit score follows you for the rest of your life, so making sure it accurately reflects your financial history and keeping it high is very important.
MyFico suggested regularly checking your credit report and evaluating it for errors. Some negative items on your credit report may be responsible for bringing your score down, but they are actually mistakes. Removing these inaccuracies will improve your credit score and help you move forward with your credit situation.
If you want to reduce the amount of debt you owe, consider setting up payment reminders or make automatic payments for bills. By eliminating debt and staying current on all types of loans, you will improve your current credit score.
Your financial history is captured by a credit score, and it is up to you to make sure it accurately reflects your reliability. If you have questions about how to improve your credit score, call Lexington Law Firm for a free credit consultation.