Your credit score is a three-digit number compiled by credit bureaus that tell lenders and banks in a general way how well you’ve met your financial obligations in the past. Your credit score is based on paying your bills on time, making your payments on loans, keeping your debt to credit ratio low and other factors. It’s not contingent on your income, meaning just having a higher salary won’t get you a higher score.
Keeping your credit score high or above 700 is one of the most important financial actions you can take. Keeping a good credit score will provide several advantages:
- You won’t need co-signer on loans. If your credit score is low, lenders may ask you to get a co-signer so they have a guarantee the co-signer will pay the loan, even if you don’t. If you have a high credit score, it shows you’ve managed your money responsibly in the past, which gives lenders more confidence you can be trusted with a loan on your own.
- You’ll be able to secure approval for home and auto loans. In fact, you need a good credit score for most kinds of loans and can be turned down for financing if your credit is too low.
- You’ll be approved for higher limits. If you want a higher limit on a credit card, line of credit or other forms of financing, you’ll be given higher limits only if you have a good credit score. This is especially important if you don’t have assets and cannot secure your loans.
- You will be able to get lower interest rates on credit cards. Most credit card companies reserve their best rates for customers with the highest credit scores. This can be a great advantage if you happen to carry a balance since you’ll be able to pay off your credit card faster with a lower interest rate.
- You may be able to land better apartments. Some landlords examine your credit score before renting out an apartment to you, so having a good score can help you land your dream home or apartment if you’re interested in renting.
- You may be able to land better jobs. Some employers check credit scores of potential employees, especially if a job involves financial responsibility. Having a good credit score can help open new career opportunities!
With all these benefits, it just makes sense to work to get the highest credit score possible. No matter what your credit score is now, you can work to improve it. There are lots of ways you can you can boost your credit rating. Start by paying your bills on time every month. You should also try paying off your credit card balance quickly if you carry one.
Money Help Center has several resources to help you improve your credit score. You can use our credit card minimum repayment calculator to see how long it will take you to get out of credit card debt. We also have a calculator to help you estimate your credit score and resources to help you budget. Try our calculators today to get the unbiased information you need to get your financial life on track.