Your credit score is one of the most important measures of financial responsibility. It’s a big part of what lenders and vendors look at when considering you for a loan or line of credit. It also can impact your ability to rent an apartment, sign a phone contract, or even get a job. Once you have established good credit, work to keep it that way so you can continue to enjoy the opportunities that come with good credit.
The financial benefits of good credit
Strong credit can help you get:
• Easier approvals: Mortgage lenders, landlords, and auto finance companies will check your credit to see how reliable you are when it comes to paying bills on time and managing debt. Some employers will run a credit check if the job requires you to access money or sensitive data.
• Lower interest rates: A high credit score not only makes it easier to be approved for services but it may also mean you may qualify for a lower interest rate on future credit accounts. You also likely won’t need a co-signer to get approved.
• Savings on insurance: According to Certified Credit Counselor Netiva Heard, founder of MNH Financial Services, LLC, having a good credit score can help you save money on insurance rates, though the impact of your credit on this may depend on the state you live in.
“Insurance companies have found that those with higher credit scores file fewer claims,” says Heard. As a result, some adjust their rates so people with good credit tend to pay lower premiums.
• Additional savings: Having good credit may even give you the ability to purchase a service without putting down a costly deposit beforehand. To learn more about the perks of having good credit, visit the Hands on Banking® website.
How to manage your credit
You can manage your credit to help you with future purchases — such as a home or vehicle — in a number of ways:
• Use credit cards smartly: Sometimes simply having a credit card can lead to spending more than you intended, leaving you unable to afford the balance. Failing to pay your credit card balance on time every month can rack up interest and hurt your credit score, so don’t spend more than you’ll be able to pay back. If you’re considering using a credit card to build your credit, take a look at the Hands on Banking website for tips on using one responsibly.
• Pay down other debt: Your credit card balance is not the only thing that can affect your credit score. Student loans and other forms of debt can lower your credit score if not managed correctly. Keep track of payments, and try to pay a little more than the minimum balance each month. Keeping your debt low can help you maintain and even improve your credit over time.
• Ask for help when you need it: If making payments on time for your credit card or a loan payment becomes too difficult, don’t be afraid to speak with the lender to negotiate a payment plan that works for you. It’s better to get ahead of any potential problems before you fall behind on payments.
Regularly review your credit
Beyond credit growth, review your credit reports annually to make sure nothing fraudulent or negative has been reported. Every 12 months, you can access your report for free from each of the three largest credit bureaus in the United States at annualcreditreport.com. “Be sure to check the inquiry and personal data sections where signs of identity theft can be spotted right away,” says Heard.
Ultimately, strong credit can help you reach your goals by qualifying you for loans, contracts, discounts, and access to even more credit options. Discipline and the ability to pay your credit-related debts off every month comes first, however.
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