Why Your Credit Score Is So Important

Why Your Credit Score Is So Important

You should know that an excellent credit score can not only help you with loans, but a whole lot more. Your credit factors into so many things, many of which he might not even be aware of.

This includes things like the type of cellular plan you may qualify for, what type of car you can afford to buy, and whether or not you can't afford a new apartment or condominium. Then there are things you might not have ever thought of, like auto insurance rates. According to GoodtoGoInsurance.org a person’s credit score is a leading factor in calculating auto insurance premiums. The better credit you have, the lower your car insurance rates will be. Conversely, the worse your credit rating is, the more you will pay for automobile coverage. 
These are just a few things that you need to be aware of when it comes to credit. Did you know more and more auto insurance companies are placing a greater emphasis on credit then ever before. While you might not think that really matters to you, if you have a low credit score under 600, you might be paying $500 more per year for the same exact coverage as another person who has a credit score above 650. This can add up to thousands and thousands of dollars over the course of just four or five years. This is why, if you do have a bad credit score, you should take action and take the necessary steps to raise it as soon as you can. Let's look at some tips that can help you not only raise your credit score, but maintain it, once you have where it needs to be.

Be Sure to Check Your Credit Score Often 

Today, there are free credit reporting sites like Credit Karma that can help you track your credit score, without ever spending any of your hard-earned money. So how often should you check your credit? You should check it at least once a year, but preferably once every 6 months. If there are items on your credit report that should not be on there, or are false, you need to contact the credit reporting agencies as soon as possible and take steps to get those items removed. If your minor children also are engaged in financial activities, you should check their credit, to make sure there are no false items on their profile. This will help them once they turn 18 to get started in life as young adults with a good score.

A Good credit Score Equals Lower Rates

If you are trying to get any type of loan, from a mortgage to an auto loan, a good credit score will save you thousands and interest payments over the life of that loan. This is especially true for mortgages, which are typically the largest amount of money most people will borrow in their lifetime. Also, car insurance providers also look at a person's credit and those with higher scores get some of the best rates available. There are just so many benefits to keeping your credit up above a 700 score.  

Monitor Your Credit Limit and Don't Exceed It 

If you have a credit card with a $10,000 limit, you don't want to exceed it. Also, it's best that you don't come close to that limit, as it can negatively hurt your credit score in the long run. Try to keep your available credit about half of the total.

Start with a Secured Credit Card

If you have had past credit issues and filed bankruptcy you are going to obviously have a low credit score. There's just no way of getting around it. If you have never applied for credit, or have no credit at all, you should start out with a secured credit card. This just means that your credit card is attached to money that you have saved up. For example, if you have a secured credit card of $500, then whatever you purchase it will be withdrawn from those funds. This is a great way to get for a young person to start out and raise their credit score.

Don't Be Late on Payments

A missed payment can have a dramatic effect on your credit score, so don't be late, ever.  if you can, set up automatic payments so you never have to worry about missing a payment to a lender or utility provider. If you are late or cannot make a payment, contact your lender and explain your situation and try to get a grace period approved, so it won't affect your credit.

Understand Your Debt to Income Ratio

This is simply the total amount of debt you have divided by your overall income. Most lenders will look at the overall debt compared to your monthly or annual income. The higher your income is and the less debt you have the more favorable you will be two lenders. On the opposite end, the more debt you have in relation to income, the less likely you are to get a loan.   

Pay off High Credit Card Interest First

If you do have outstanding balances each month on your credit cards and are in a position to start paying them off, check which ones have the highest interest rates. Those are the cards that you want to get paid down as soon as possible. Also, check around four or five credit card offers that allow balance transfers and no interest for 12 to 18 months. Just a few minutes of work and save you thousands of dollars in interest over the course of those 12 to 18 months. Always pay off as much debt as you can, with the eventual goal of becoming debt-free.
Take advantage of these tips and watch your credit score go up and your interest rates go down.

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