Having a good credit score is how you can open your way in the United States. It gives you access to all the variety of credit options that you can get since this is how you show the companies that lend money that you are a person that pays his/her debts.
We can see that society nowadays is getting more and more dependent on credit. It’s just a matter of going out and being aware of all the payment options we can find when we want to buy something, whether it is a smartphone, a car, even a house. So, it’s mandatory that we are able to understand the importance of the score, how to build credit, and how to get a good credit score.
Even though a lot of people are aware of the words mentioned above, there are a lot more that don’t pay attention to this. You can see them following crazy instructions about fast ways to increase credit score from untrusted sources, and at the same time they begin to do what is known as a “bad personal finance strategy” like:
- Letting the bills expire.
- Pay after the due date.
- Take loans that they know they can’t pay.
Once they’ve done this and more, they are surprised of not being able to borrow more money from lenders. But the thing is, that it’s obvious since they lost all the credibility along with their credit score. For them, the only thing remaining are loans for people with a bad credit score. And believe us, you don’t want to be part of them.
A good credit score is the one that allows you to apply and get approved in the majority of loans and get better terms and lower interest rates. This number is provided by companies that use the data given by TransUnion, Equifax and Experian. Then, they transform those reports into a scoring system that delivers a unique credit score number.
You may now be wondering “what is considered a good credit score?”
Well, there are 2 companies that can actually tell you this. They are FICO (Fair Isaac Corporation) and VantageScore. They both have criteria that give a person a number between 300 and 850.
So, when a person wants to apply for a loan, he/she needs to fill up the financial information and send it. Then, the lender’s employees run a credit check with the companies mentioned previously in order to see if the applicant can be trusted.
Once they have your credit score number they will reply with a positive or negative answer to the application.
But, how do you know if you have a good credit score?
Easy. You just need to take into account that the companies that send your score to the lenders follow these criteria:
- Scores above 800 are considered Exceptional.
- Between 740 and 799 are Very good.
- Between 670 and 739 are Good.
- Scores between 580 and 669 are Fair.
- Lower than 579 are considered as Bad.
The more credit you have, the easier it will be to get better deals with the lenders. You will be able to borrow more money and be able to actually buy all you need or solve all your urgencies without any kind of delays.
If you are still a bit insecure about why you should maintain a good credit score in the USA, here we have 4 reasons that will give you a better overview.
1- It’s easier to get a credit card or loan approvals
With a good credit score, it would be a lot easier to get a new credit card. The same happens for the application for a loan. Even though lenders don’t take this as a decisive factor, since they have other criteria like monthly income, it can improve your odds of being approved.
On the other hand, borrowers that have poor credit find this really hard.
Not only because they have been rejected a lot of times before, but because the limits and due dates they are given are not in their favor.
2- Sometimes the expenses require good credit
This is something that you may not know, but your credit score is actually a decisive factor when it comes to utility services.
Actually, before they turn your services on, they check your credit history in order to see the flaws that you may have. This can be seen in your cable, telephone, internet, water, and electricity suppliers.
3- Better car insurance rates
We all know that in the States a car is a must instead of a luxury.
So, you must know that in order to get your car insurance, companies check your credit score in order to set your insurance risk score. If you have a low credit score you will have a higher insurance rate, which means that you will pay more for it.
4- You have more power in negotiations
At last but not least, good credit scores give you quite leverage when you are negotiating interest rates. It’s also of great help when you are getting a new loan or a new credit card.
Since you have the doors open in a variety of options in other lenders, you can use that power to bargain better terms and even other advantages with the company you want to borrow money from.
As you can see, credit reports are really important for a lender when he receives and checks a loan application from you. Therefore, your obligation if you want to grow in economic and bargain power, is to have a good credit score so you can have options when it comes to borrowing money.
Maintaining your score is not an easy task, and there’s no such a thing as “increase credit score fast”. You need to follow personal finance strategies and have a mindset that allows you to use your income and your financial options as wisely as possible so you can build up more credit and live in this dynamic economy.