If you are someone who just started a new job, you will have people giving you a plethora of financial advice. Keeping a separate emergency fund and clearing your debts is something that everyone tells you. But there is another bit of financial guidance that most people forget to mention.
It’s to keep a high credit score. But why, you ask? Let’s dig into the article to find out.
A credit score is a simple 3 digit number that contains all the information about your financial situation. It is a number between 300-850 that is based on several factors. It decides whether a financial institution finds you trustworthy to pay back your loans on time.
Let’s take a look at a few privileges of having a good credit score.
- A good credit score offers you lower interest rates on loans. A good score ranges between 750-850.
- It also decides if a landlord wants to rent you an apartment. You might also get the option of a lower security deposit since the owner trusts your power of timely payments.
- It helps you get a job. Employers now are checking the credit score to determine if you can be trusted with their financial resources. It also assures them that you won’t be bribed on the job.
- You can also get easy approvals for new credit cards, home loans, or car insurance.
There are many advantages of a good credit score. But what if you have a bad credit score? Well, no worries. There are credit repair professionals who can help you improve your credit score. These professionals handle credit score checking and help you improve your score.
When you are in your 20s, a credit score is the last thing on your mind. But suppose after some time, you want to buy a car or mortgage an apartment. That’s where the credit score will affect your life.
This is the reason you need to measure your credit score from an earlier time and not just when you actually need a loan.
Let’s take a look at how a regular measurement of your credit card score can be beneficial to you.
1. Stay Updated on Your Financial Situation
It is a good practice to be aware of your financial standings. Measuring your credit score regularly is a measure of your financial health just like a good health check-up is a measure of your physical health.
It makes you aware of any financial mishap that can be corrected at an earlier time. By doing so, you can avoid being rejected by banks when you need an urgent loan. It is a determinant of your creditworthiness.
An employer may be checking your credit score to decide if you are fit for a job. Checking your score timely will help you see what a lender or an employer will see in your financial report.
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2. Keep Your Credit Report Error-Free
Suppose you apply for a loan or a credit card. The bank shares your personal information and additional documents needed by the credit bureau to pass your loan application. What if your application gets rejected due to some spelling mistake in your name? Or what if you find that there is a wrongly issued credit card in your name that you know nothing about?
Such errors are easier to be made by a bank. Generating a credit score regularly helps you identify these omissions ahead of time. You can correct your credit report and build a better credit score.
Measuring your credit score helps you identify mistakes made by others that can affect your credit assessment. For example, if a medical bill was supposed to be covered by insurance but has not been paid yet. It’s not entirely your fault but you will be bearing the consequences of other people’s mistakes.
3. Identify an Identity Theft
A thief can steal your personal information and get a loan or a credit card in your name, without your knowledge. This is why it is advised to state the reason and sign each copy of the personal information that you give to any competent authority. That’s how you can avoid identity theft.
But how can you know if identity theft has already happened to you? You can do so by measuring your credit card score. It tells you if a fraudulent card has been issued in your name. It can also tell you about any unfamiliar transaction that has occurred from an account linked to you.
Identity theft has become very common these days. If you want to avoid being stuck with any such issues, get your credit card score checked regularly.
4. Find Better Financial Deals
Knowing that you have a good or bad credit score helps you land better loans and credit card deals. For example, suppose you have your eyes set on a credit card that gives you certain benefits and rewards. But what if you find out that you deserve a better credit card than that?
Sometimes, people are unaware that they can get certain financial benefits with a good credit score. Checking it regularly can help you identify such benefits. Most people make the mistake of checking their credit card score after applying for a loan or credit card.
While this is not wrong, it doesn’t really serve any purpose as well. If you check your credit score earlier, you may find out if you deserve a better deal. Or if you have a bad credit score, you will have the time to improve it before any such application.
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5. Make Educated Decisions When You Apply for a New Credit
When you apply for a loan or credit card, the bank fetches your credit score to decide your creditworthiness. This is known as a hard inquiry. Doing such processes more than once or twice a year lowers your credit card score. But you wouldn’t know it if you don’t check your score regularly.
By measuring your score on time, you can make certain changes to increase your score. This helps you to keep a balanced credit card score throughout your life.
You can literally save thousands of dollars in interest payment with a good credit score. But how will you know if you have a good credit card score? Or how can you improve your score if you don’t know how much it is?
That is why you need to measure it regularly and work on it if the score is not high enough. For most of us, it is not possible to have enough disposable cash to pay for college tuition or buy a house.
We can only get these things on credit. That is why maintaining a good credit score becomes so important in life. Start working on your credit score now, to get bigger benefits in life.