If you are looking to get better interest rates and more credit, building your credit score is essential in the long run. Whether it’s getting a lower interest for loans, premiums on auto and homeowner coverage, or better payment plans, your credit score influences all these in your financial life. Nowadays, your creditworthiness determines the loans you can get and your interest rates. For example, if you have a low credit score, you would be offered a higher interest rate for a car compared to if you have a high credit score. Essentially, your credit score is a financial tool that can either help you or bring you down. Since your credit score has such a high impact on your financial life, it is critical to keep track and maintain the score.
What is a credit score?
A credit score is a number that rates your credit risk and predicts how likely you are to pay back a loan on time. Your credit score slightly varies depending on where and when it is being checked. Credit scores are calculated by a scoring model that includes your payment history, debt, applications for credit, credit history length, types of credit accounts, and outstanding balances.
Some tips to build a better credit score:
Set your credit card payments to auto payment to prevent missed bill payments. Your bill paying record is the biggest factor in your credit score. Not paying your bills on time is a killer; missing a single payment could take you down a significant amount of points
Pay your card balance strategically: know your credit limit on cards, utilize less than 30 percent of the limit, and pay balances in full. Your goal is to pay back any debt as quickly as possible.
Avoid starting new accounts within short periods of each other. These are high impact and take a hard inquiry on your credit score.
Starting new accounts or asking for a higher credit limit may lower your credit score in the short run, but it will lower your overall credit utilization which leads to a high credit score down the line.
Become an authorized user to a relative or friend who has a higher credit score if you have a light credit file. The authorized user status gives you the benefits of established credit from the primary user’s good standing.
Add your rent and utility payments to your credit reports. A record of long, consistent rent payments will boost your credit score.
Benefits of good credit
Grow your credit by monitoring your credit score consistently and building healthy financial habits. Once your score increases to above 760, you are considered excellent credit standing and can expect the best rates from lenders. This is the best time to reconsider your options for refinancing and loans. Don’t underestimate the power of good credit, qualify for better insurance rates, lower credit card interest, approval for higher credit limits, more housing options, and more. Instead of suffering the consequences of poor credit, gain the privilege of having options of the best rates.
At Spinnaker, we understand that your credit has an incredible impact in your financial life. It is important to take care of your finances as it can help you commit to more financial goals in the long run. Contact our financial experts at Spinnaker Investment Group to help you seek professional financial assistance and achieve the financial freedom you deserve today.
The information contained herein is based on internal research derived from various sources and does not purport to be statements of all material facts relating to the securities mentioned. The information contained herein, while not guaranteed as to the accuracy or completeness, has been obtained from sources we believe to be reliable. Opinions expressed herein are subject to change without notice.