Your credit score has a significant effect on your financial health. In this article, we’ll be looking at how the quality of your credit score can mean an easier or a harder life. We will also consider the most effective ways to improve your credit score.
Low credit score woes
There are a lot of great benefits when you have a good credit score. Some of the most prominent are:
- Access to the best credit card deals. Credit card companies are more open to offering low-interest rates and higher limits to individuals with good credit scores.
- Power to bargain. With a good credit score, loan officers and business owners will be more open to entertaining your request for lower interest rates and longer terms.
- An easier time renting an apartment. Landlords are more open to renting if your credit score indicates financial trustworthiness.
- No deposits on utilities. With a healthy credit score, you can get services from a electric company with no deposit. You also get the cheapest electricity rates. The same goes for other utility providers.
- Better car insurance rates. Insurance companies use credit scores to determine monthly premiums. If you want the best deal, you need to have a good credit score
- Get your dream job. Employers in specific industries, especially the banking and finance sector, aren’t open to hiring individuals with bad credit scores. Such a financial situation makes them uncomfortable about trusting you with the finances of others.
Now that you know what’s fantastic about a good credit score, let’s take a look at the consequences of a bad credit score.
- Getting approved for a loan is almost impossible. Even if you are approved for a loan, the interest rate will be high and the terms restrictive.
- Landlords aren’t keen on tenants with bad credit. It’s a warning sign that rent payments may not be made on time. Even if the landlord does agree to rent, he will probably charge a higher security deposit or request a co-signer on the lease.
- Buying a house is even harder because lenders don’t want to take the risk of accepting a mortgage application from someone with a bad credit history. You’ll also have trouble getting a loan for buying a car or starting a business.
- Security deposits can add hundreds of dollars to your utility bill. Getting no-deposit electricity or other utilities with no security deposits becomes impossible.
- Getting a cellphone service contract with favorable terms is difficult. Cell phone carriers consider people with low credit scores as higher-risk customers who are less likely to make payments on time.
A bad credit score is something that’s best avoided at all costs. But if you have a credit score that is less than ideal due to circumstances beyond your control, use the following tips to turn things around.
How to improve your credit score with these simple steps
- Get rid of your credit cards. If you aren’t using your credit cards, you can’t accrue more debt on them and can focus strictly on settling your credit card debts.
- Prioritize your bills and debts and start paying them on due dates. If you start paying all your bills on time, your present track record will offset your bad history and positively influence your credit score.
- Don’t open new credit accounts. More credit means more debt, which will harm your credit score in multiple ways.
In summary, avoid accruing more debt by avoiding the use of credit and work hard towards paying back owed sums on due dates. Missing any further payments will negatively affect your credit score all over again.
Frugal tips to help you regain your financial freedom
Watching how you spend will help you minimize debt and achieve financial freedom. Here are smart frugal tips to help you cut down spending and save more:
- Have a budget. With a budget, you have a clear picture of your expenses for a week or a month, and you can avoid unnecessary or unplanned expenses.
- Prioritize expenses. Your most essential expenses get top priority at the top of your budget. For example, your utility bills and credit card payments should be at the top, followed by food. Whatever is left of your earnings can be put aside for other needed things.
- Focus on saving. For every dollar you earn, put aside a bit in a high-yield savings account and let it grow.
- Hunt for bargains. Look to make purchases that offer discounts and other cost-saving incentives. Also, don’t be afraid to negotiate for lower prices.
- Get the best deal on utilities and services. With the cheapest electricity rates and other utilities at the lowest prices, you’ll save a lot of money in the long run.
The more you can save and the less you spend on luxury or unnecessary items, the more you’ll have for settling your debts and reviving your credit score.