What are the benefits of having a good credit score?

Good credit scores are very important, especially when it comes to dealing with major finances. With a good credit score, you can get bigger and better loans, a great mortgage deal, a good rental home and even a car.

Here are some major benefits that come with owning a god credit score

You get to enjoy better interest rates

It does not matter who you are, loan lenders will check your credit card history before they approve your application for a loan. With a good credit score, you are more likely going to get better loans that anyone who has a lower credit scores. Lenders are known to offer lower interest on loans and credits for people who have a good credit history.  Basically, you get to pay less interest on the credit card balances than people with average or lower credit card history.

There is a better chance for loan and credit card approval

As you know, lenders will check your credit card history before they approve any loan. They are usually keen on the information concerning the previous loan and credit card debts and how you dealt with them. If you have a great credit card sore, it is an indication that you make the loan and bill payments on time.  This way, you get a better chance for loan approval. Lenders take your credit card account together with debt and income to get a feel of how much loans you can manage and if you can complete the payments on time.

You gain negotiating power

A good credit score naturally has the ability to give you a great negotiating power. With a close to perfect score, you are capable of negotiating for lower interest rates on the loans and credits you get. One common technique is to refer to the lender’s previous offers. This way, you can use it to negotiate for lower interest rates. Having a poor credit score will restrain you from choosing between different convenient lenders and shopping for the best deals.

Renting apartments and homes will be easier for you

Property managers and landlords check your credit scores before approving your application. Your credit history contains a lot of information, which means they get access to past rental issues if you have had any. Issues like rental balance and property damage will make it harder for you to find a home owner willing to rent you their property.

Less security deposit payments

If you have a bad credit score, lenders will require you to pay a security deposit on almost anything. You will need the deposit for things as simple as new credit cards and utilities. With a good credit card, you can establish utility services and get discounts on larger loans like mortgages. Having a good credit score will lower the payments you have to make on the security deposits.

Better car insurance rates

It is close to impossible to get a good auto insurance policy when you have a poor credit card score. People with a great credit score pay less for insurance and people with poor credits pay more for the exact same services.

Learn how to qualify for a loan without collateral

There are multiple situations where you may need to borrow money to meet some financial needs. You could be looking to purchase a vehicle, do some home renovations, cater for funeral expenses, and pay for an unexpected event, overdrafts, credit card deficits, debt consolidation and other issues. Most lenders if not all, will need you to prove that you can repay the loan according to their terms. They will look at different factors to determine your credibility.

Collateral is a huge part of loan approval, especially if you are going for a major loan. Without it, the chances of getting a loan approval are minimal. Here is what you can do to get a loan without collateral.

Get a copy of your credit card history

A credit card report gives you a complete picture of your creditworthiness.  This part of the process is very important. You can get your credit report online. The annual credit report website has a complete outline of your credit history. The report also includes your financial status. This gives you the chance to check for any mistakes on the report and fix them to increase your points and make the application process easy.

Check the credit score

The difference between a secured and unsecured loan is that you will not need collateral to qualify for the latter.  The lender will need other forms of assurance to ensure you are going to pay back the whole loan plus interest. Here is where having a good credit score comes in. it plays a major factor in helping you qualify for the loan. A good or excellent score will help you qualify for larger loans at great interest rates without having any collateral.

Pay all your debts

Clearing your debts increases the ratio of income to debt. This, in turn, grows your credit score over the long run. Ensure you have a way of making all the repayments on time. Taking extra jobs or borrowing from family and friends will help you clear the loans faster. As a result, you will not have impact on your credit score which gives you a higher chance of qualifying for an unsecured loan.

Pay the bills on time

When the bills are paid on time, your credit score will also improve. This is very helpful especially when you have a low credit score. People with high scores benefit from high interest rates and better loan payment plans.

Find a good lender

Lenders are responsible for setting the qualifications and requirements for a loan. Your chances grow bigger when you find a suitable lender with better or more convenient terms and conditions. You can choose to work with lenders you have had previous financial relationships with to increase the chances.

Final word

A good credit score is not the only determining factor. Apart from that, the lenders will also need documentation to prove that you have a steady and reliable income.  This helps them calculate the frequency and time of the repayment of your loan. Having proof of regular income will increase your chances of qualifying for a major loan.

How to maintain a good credit score

The major benefits of having a good credit score are often under looked by many.  Your credit score is very essential especially to potential lenders. They use it as the main determinant of your creditworthiness.  A high score will get your loan application qualified while a low score will close all the gates to a better financial opportunity.  With a good credit, you have access to both secured and unsecured loans of all kinds.  It impacts your ability to get better access and terms to employment opportunities, apartments, personal loans, insurance coverage and mortgages among others. 

Different lenders have their own ways of determining the financial risk and your ability to make complete payments on the loan before they make the big decisions to approve your request. To improve your financial capability you need to maintain a good score in the following ways.

Pay all the bills on time

Lenders associate bad credit history to poor loan payments and other issues, which is almost always true. If you have a bad credit report, chances are you have unpaid bills. Late payments on bills, loan repayments and credit cards attract harsh penalties.  By failing to make all your payments on time, the lenders normally get involved with the credit bureaus. This results to a lower score that tarnishes your eligibility for loans in the future.  Every time you miss a payment, it leads to a lower credit score.

Make regular checks

This is very important as it helps you assess the financial condition. Knowing your financial stand will help you reduce the risk and chances of developing inaccurate information on your credit card history which in turn affects your credit score.  Making regular checks will enable you to dispute any misinterpretations and ensure the credit score remains at an all time high.

Manage the credit applications

Excessive number of loans and having too many credit cards at the same time will affect your level of debt. This makes it difficult for you to make payments on all the loans together. Taking too many loans could cause you to be stuck in a cycle of debt and repayment, where you take up new debt to meet the financial shortfall created by your current debt. This will have a massive impact on your credit history and score.

Budget for all expenditures

If you account for all your expenditure, you have higher chances of maintaining a good credit score. By keeping your spending low and within your level of income, you will not need to take up debt and risk affecting your score. You will also be more likely to save and improve your financial state by maintaining a budget.

Reduce the debt to income ratio

Maintain low balances to improve your income to debt ratio. Addressing your debt before applying for a loan increases your chances to qualify for great loan deals. If you cannot clear debt in the short term, you may consider taking up a debt management plan to help you overcome it. Consider increasing your income to help reduce your debt quickly. You can do this by finding additional sources of income such as a new business venture, finding additional part time employment or monetizing your hobby.

How credit card rewards can cost you

Credit cards have been around for a good period of time. They offer you rewards for every dollar or so you spend on basic products which makes them very enticing and beneficial. Rewards you get from credit cards can come in form of bonuses, points and free miles. Some credit card companies will give you a major bonus when you first sign up for the card. The bad news is, you may end up messing your credit score or finances trying to earn points and rewards on your credits.

Here are some of the things that have potential to cost you more than you should spend.

Some people overspend so they can earn a signup bonus

Credit cards offer bonuses in form of miles and points to entice people to sign up for.  The thing is, you need some few requirements to spend a certain amount of money within a given time to earn the reward. You can end up spending more than you should or even on things that you do not need. Also after all this effort, you can fail to meet the allotted time which is not rewarding.

Too much annual fee

Some of the best credit cards charge a minimum of 450 dollars for the annual costs. For travel or rewards credit card, there is a yearly fee required for maintenance. One might argue that Y the rewards and travel benefits you get are worth the annual fees, but they might not be worth it especially if you sign up for too many credit cards.

Chasing rewards leads to debt accumulation

  Not everyone with a credit card pays back the balance entirely every month. For those who do not repay the loan in full, some of them are looking to gain rewards. They are subjected to up to 17 per cent interest rate which is much higher than the awards. Due to the high interest rates, the debt also increases every month. Instead of using credit cards to make purchases and you are unable to repay, it is advisable to use cash or debit cards.

Possibility of damaging your credit score

Depending on how you use your credit card, you can end up damaging your credit score. Signing up for many credit cards means that there will be investigations on your credit score. When the inquiry is hard, your credit score is likely to drop. When you are also unable to pay your credit bills or taking large balances beyond your credit limits you affect your FICO score negatively.

The annual fees is too much

Some of the best credit cards charge a minimum of 450 dollars for the annual costs. There is a yearly fee required to maintain a travel or rewards credit card.  You might argue that the rewards and travel benefits you get are worth the annual fees, but they might not be worth it especially if you sign up for too many credit cards.

Final word

Failure to pay your balances can also leave in debt and with a bad credit score. Establish your spending limitation to avoid such consequences.

Establishing a good credit history

Building a credit score from the start is hard especially when you do not have any credit history. Without any financial history, it’s going to be hard t get a loan or an apartment. High credit scores come in handy when you are trying to build a business, get a job, take insurance, secure a loan, get a mortgage and purchase a vehicle. Lenders take your credit into account to predict if you are going to complete the repayments on time. The problem is, how can you get your first credit card when you need a bit of financial history to get one in the first place?

Here is how you can do it

Apply for a secured credit cards loan

For people who are trying to build their credit cards from scratch, it is way easier to do it when you have a secured credit card. It can be difficult to get a normal credit card approved, which is why you should for the secured loan as your first option. With the secured credit loan, you will have to make a security deposit upfront. The payments amount is exactly the same as the loan limit for your credit card.

This is the best way to build your credit from scratch. Once the payments are made on the credit cards, you will start receiving the credit card scores.  If you do not make the payments on time, the deposit will be used as collateral. When you have gained enough points to qualify for any other credit card, you can now get rid of the secured credit account and get an unsecured one.

Get a co-signer

There are plenty of people with good credit scores. If you happen to know someone really close with a great score, you can ask to co-sign their credit cards. It is really a simple process that will boost your credit card scores. This method is kind of tricky in its own way; if you do not make loan and credit payments on time you are not the one to suffer. This can seriously damage the credibility and credit history of the co-signer.

Get credit for your rentals

You want to take advantage of every chance you get. Some services will give you an option of adding the rental payments to your credit cards. This means that every time you make the rental payments, you get to build up points and a credit history.  This is a great way to get something positive going. Keep in mind that not all lenders will accept the rental payment plans on your credit cards. Make sure they have this policy before signing up for a credit card.

Become an authorised user on someone’s credit cards

Close family, business partners and friends can legally ass you to their credit cards as a co-user. You are legally allowed to access their credit cards for the purpose of usage and building some points on your own credit. As long as you create conditions and terms for the shared credits you will not have issues like late payments and misuse of funds.