Credit is the driving force behind almost every financial move you make. And if your credit score is low, it may be holding you back more than you know. Even if a loan isn’t on the horizon, managing your score is an integral part of responsible money management.
Your credit score is a crucial indicator of whether you’re a good financial bet in numerous areas of life. Were you not convinced? Check out these four reasons why improving your score is a smart move, and learn how to work toward doing that.
1. To Access the Best in Credit When You Need It
Loans are among the most common reasons to need a strong credit score. Auto loans, mortgages, and student loans are all part of life. While it’s great to imagine saving up enough cash for a large purchase, doing so can be challenging. Most of lives biggest buy significantly exceed annual incomes, making these ambitious goals more achievable with a loan.
Plan for purchases that require credit by assessing where your score is now. If it’s outside your target range, identify the changes you need to make to improve it. Consider getting a credit builder card to establish a solid payment and credit use history. Dispute inaccuracies on your credit report if lousy information drives your score down.
2. To Live Where You Want
If you’re itching to move, you may want to check your credit score. Apartment leases, home rentals, and mortgages all require a credit check. If your score comes in too low to qualify, you’ll be out more than a place to lay your head. Lenders and leasing offices require a hard pull of your credit report. Each one shows as an inquiry on your information, and too many can drive your score down further.
Most lenders view a score of 670 as indicative of a lower-risk borrower. Aim for a minimum score of 670, but strive for a goal of 740 or better. Scores above this amount can often earn borrowers more than a loan approval. Higher scores can yield lower rates, better terms, and lower costs. Working to increase your score will expand your options and save you money year over year.
3. To Ensure Your Job Offer Stands
While you may think this part will be a breeze, don’t start celebrating yet. You’ve gone through the interview process and showcased your skills, and now you’ve received the job offer you longed for. You’ve just got to make it past the background check. Many employers check your credit too, and if it’s too low, you may be back to interviewing.
Solid credit and responsible financial behavior are often considered indicators of professional credibility. Especially if your hoped-for role is in the financial industry or requires access to financial information, good credit is paramount. Low credit scores can cast doubt on your ability to be trusted with financial accounts. Consider a good credit score part of your résumé, and you can enter the final recruitment stages with confidence.
4. To Avoid Losing Money to Deposits
Finally, getting your phone plan and the latest smartphone is a significant milestone not to be forgotten. If you have low credit, it’ll be one you remember, thanks to the surprise costs associated with this new independence.
Customers with low credit often pay more for cell phone service, are required to pay a non-negotiable security deposit. If your score is too low, you may not qualify for the better-known carriers. Instead, you could have to go for a prepaid phone that may lack the service quality you hoped for.
Utilities like water, natural gas, and electricity are needed. While you may not be shut out of receiving services, you may again be forced to pay a deposit.
Utility deposits help protect the provider if you don’t pay your bill. With low credit tarnishing your record before your meter turns, you may have to hand over hundreds of dollars. Many utility companies don’t release these funds until you exit your customer relationship, leaving you without access to your cash.
Reinforce Good Credit Habits Daily
Building and maintaining good credit is an action you must take daily. If doing so hasn’t been part of your practice, you should first familiarize yourself with what makes up your score. On-time payment history, credit utilization ratio, credit length, credit mix, and new credit all contribute to your number. Request your free annual credit report and analyze which of your past habits might account for your current low score—working on the factors that impact your score the most, like on-time payment history (35%) and credit utilization (30%).
Once you’ve implemented your plan, keep tabs on your score, checking in regularly to track your progress. Thanks to pandemic relief measures, you can request your credit report weekly free of charge through April 2022. Use this report to get a baseline of the credit habits submitted to the bureaus.
As your score improves, continue to check your report to ensure accurate data is being logged on your behalf. With your consistent effort and vigilance, your score can improve each month, leaving you ready for just about anything.
