One of the most important aspects of your personal finances is your credit. Your credit is basically a snapshot of your financial habits. Financial service providers, from lenders to insurers, look at your credit in order to determine what type of risk you represent.
Not only does this mean that you should regularly check your credit report, but it also means that you should make an effort to improve your credit score. You may not need a loan, but you never know when you’ll need your good credit for a better insurance, to be approved for a new cell phone service, or even to get a job (although employers are only supposed to look at your credit report, and not your credit score).
Improving Your Credit
The best thing you can do to improve or maintain your credit is to make all of your bill payments on time and in full. If you make your minimum payments on time, it shows that you are responsible and that you meet your obligations, and that is the most important part of your finances — at least when it comes to borrowing.
Other ways that you can help boost your credit include:
- Pay down some of your debt so that you are using a smaller percentage of your available credit.
- Keep some of your older card accounts open longer so you have a longer credit history.
- Avoid new credit inquiries for a few months. If you take your time between credit inquiries that can help you avoid taking a hit to your credit score.
Another technique is to check your credit report for errors. Some errors can be large enough to impact your credit score negatively. If this is the case, you need to have those errors fixed. Once those mistakes are corrected, you should see an improvement in your credit score.
Maintaining a Good Credit Score
You want to maintain a good credit score, since it will help you enjoy better interest rates on loans, saving you money, and it will also allow you access to other money-saving opportunities, such as balance transfer credit cards, lower deposits on some rentals, and lower insurance rates.
Anymore, your credit score isn’t just used by lenders. Because it’s a convenient numeric representation of some of your financial activities, your credit score is being used by more financial service providers. It’s important that you recognize this, and that you plan accordingly. Don’t neglect your credit report just because you don’t think that you will need a loan anytime soon. Remember that your credit score affects other decisions about your financial situation, and that you really do need to keep up with your credit situation.
It may not be fair, but it’s the way things work in finances. Unfortunately, financial service providers want a quick and easy way to make decisions, instead of just getting to know you. As a result, it means that the three-digit number is becoming more important. It’s easy to make a decision based on a number, than on individual circumstances. And that means you always need to be ready with good credit.
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