A credit score refers to a number assigned to an individual indicating their ability to repay a loan. The credit score ranges between 300 and 850. A score of between 670 and 739 is considered good, 640 to 799 is very good and 800 and above is excellent. A score of 300 to 629 is deemed bad, while 230 to 689 is fair.
A good credit score improves your personal line of credit, allowing you to borrow money for a certain period. Read on to learn some excellent reasons to keep your credit score in good standing and how you can achieve that.
Reasons to Keep Your Credit Score in Good Standing
Having a good credit score comes with numerous advantages. The following are some of them.
1. Fast and Easy Credit Approval
The most common perk of having a good credit score is receiving fast and easy credit approval. If you have a good credit score, banks, financial institutions, and other money lenders are more likely to approve your application for loans. As such, you will spend less time getting a loan than an individual with a bad credit score.
2. Low-Interest Rates
Aside from getting quick loan approvals, you will enjoy low-interest rates with a good credit score. Taking a loan with low interest means paying less than people with bad scores. Paying less interest can save you a lot of money in the long run.
3. Higher Credit Limits
Credit scores determine how much money you can get from lenders. Lenders will be willing to offer you higher credit limits if you have a good score. That is because a good score indicates that you are creditworthy and financially secure.
4. More Negotiating Power
A good credit score facilitates loan pre-approvals. This will give you more negotiating power when shopping for things like a house or a vehicle. You will also enjoy more purchasing power.
5. Job Opportunities
Today, many employers do background checks when evaluating potential employees. A good credit score can increase your opportunities to get a job because it shows that you are a responsible and reliable individual. On the other hand, a bad score can ruin your chances of getting employed.
How to Get and Maintain a Good Credit Score
Getting and maintaining a good credit score is an ongoing process. The following are proven ways to attain a good score and maintain it.
1. Pay Your Loans on Time
One of the best ways to create a strong credit score and maintain it is to pay your loans on time. Clearing your loans before they become delinquent will increase your score over time. Creating reminders or automatic payments is an excellent way to ensure you are up-to-date with your loan repayments.
2. Apply for Necessary Credit Only
The availability of many lenders today can tempt you to borrow unnecessary loans. Applying for many loans in a short period can indicate to lenders that you have financial issues. The best thing to do is take the necessary loans only. Taking fewer loans that you can manage will positively affect your credit score.
3. Avoid Reaching Your Credit Limit
Credit scoring takes into account your credit limit. Letting your loans reach your limit can affect your score. You can get around this issue by ensuring you borrow less than your threshold. As a general rule of thumb, you should keep your loan at less than 30% of your total limit.
4. Frequently Assess Your Credit Reports
Assessing your credit reports on a regular basis can help increase your score. Evaluating the statements can help you identify ways to improve your score. You may also identify issues with the reports and dispute them to ensure they do not affect your scoring.
5. Consolidate Your Loans
It is common for individuals to have several outstanding loans. If you have many debts, loan consolidation can help increase your score. Also, taking a consolidated loan to pay other outstanding credits will leave you with only one payment to manage.
Having a good credit score is a good thing. You will enjoy many financial perks, such as fast credit approvals, high loan limits, and reduced interest rates. Paying loans on time, avoiding unnecessary credit, and assessing credit reports are simple yet effective ways to give yourself a good credit standing.
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