Credit score is misunderstood by many, and underestimated by even more. If you want a mortgage, a car or even a phone contract, your financial history will have to be nigh-on perfect.
It’s this history that lenders, companies and banks will look at to decide whether you’ll be eligible for their cash. If you have a proven history of paying off debts, credit and loans, you’ll be in a much better position going forward.
If your history is less than desirable, however, your circumstances will certainly reflect this. You may struggle to find a lender for any kind of product, from houses to apartments to cars. It’ll be hard for you to get a loan to pay off any debts, and these debts can start to pile up. If you’re reading this and are young, or have just started borrowing, make sure you pay back on time. You’ll thank yourself in the future.
If you’re looking for some advice on how to get good credit, there are numerous sources you can use. This article will run down some of the benefits, some reasons why a good score is worth seeking out. It could be the deciding factor in many of life’s financial decisions – so take the time to brush up!
A better car insurance rate
Car insurance, especially for new drivers, is incredibly expensive. It’s one of the reasons why our youngsters aren’t bothering with a car, or driving in general. Aside from being a first-time driver, another reason why your insurance price can skyrocket is due to a poor credit history.
To car insurance providers, those people with bad credit are a risky investment. They are the people who are more likely to crash their car into a tree, or otherwise damage their vehicle. Thus, they’ll charge you more for insurance and you’ll be a victim of a poor credit score.
More likely to be approved for a mortgage
Obtaining a mortgage is among the most difficult of financial endeavors. House prices have skyrocketed, wages have frozen and lenders are becoming more and more careful. Fifteen years ago, people were approved for mortgages left, right and centre. Getting a mortgage was much more simple, and as such, anyone could get one. This led to a lot of people being unable to keep up with payments, and banks becoming less lenient.
So, nowadays, it’s a lot more difficult. If you don’t have a good credit score or one massive down payment, you aren’t moving to that new home. And given how hard it can be to save up those large amounts of cash, this may not be an option. Unless your financial history is impeccable, you likely aren’t getting approved at all.
More negotiating power in financial agreements
A better credit score gives you more negotiating power to leverage a lower interest rate. A better credit score means that you will get more offers from lenders, and you can use these to your advantage.
Let’s say Bank A offers you a 4% interest rate, and bank B offers you 3%. These offers are a result of your good financial history, and wouldn’t have been given to you without it. You now have the power to go to Bank A and tell them about the better offer you received from their competitor. This can result in you gaining an even lower rate than was originally offered, which will help you greatly in the long run.
However, if your history isn’t great, you won’t be able to sway lenders one way or the other. The terms they give you will be the terms that are set in stone, and you’ll ultimately be at the mercy of the lender.
Get approved for business loans to begin your start-up
Our economy is relying on business owners. They create more jobs, helping to curb unemployment rates, and pump money back into our industries. New businesses, in countries around the world, are thriving, but without a good credit score this wouldn’t be true.
Because businesses are such risky endeavors, a perfect credit score is required. You could borrow that money, only to go bust and bankrupt within a year. As such, you need to look as appealing to lenders as humanly possible, and your credit score is a factor in that.
These four benefits, among others, are just a few reasons why a good credit score should be high on your list of priorities. Of course, some aspects of your financials are out of your control. You might not be able to make that mortgage payment that month, and you might not be able to afford your phone bill.
All you can do is put yourself in the best situation possible, and hope for the best. Some lenders, like ones found online, can be more lenient, but this isn’t a surefire bet. At the end of the day, there are no guarantees you will get approved for anything!