Why Give AF About Your Credit?!

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Your credit score isn’t just a judgment call; it’s determined through a formula considering five different factors. Listed in order of importance, each of the following factors can raise or lower your credit score:

Payment history
Credit utilization
Length of credit history
Credit mix
New credit

Your credit utilization ratio (also referred to as debt-to-available-credit ratio) is how much of your total credit limit you use. Typically, you want to keep this figure between 10 and 30 percent to stay in good standing. Opening up new card accounts or getting a credit limit increase can help build credit by decreasing this ratio, but that isn’t all it takes. By making the effort to pay off your outstanding balances you’ll help your credit utilization, thus improving your credit score.

Adding new types of debt into your profile such as personal loans or auto loans will give you a healthier credit mix and raise your credit score. If you can manage the payments, opening new credit card accounts and other debt is generally beneficial. That being said, don’t apply for multiple new credit sources all at once — it doesn’t look good in the eyes of credit issuers.

Why is building credit important?

Building credit may not be on your radar, but it should. Lenders check your credit history any time you want to open a new financial product, like a loan or credit card. They may only approve applicants who meet certain credit requirements, such as having a good or excellent credit score.

If you don’t have good credit, you may miss out on securing a low-interest rate on a mortgage, personal loan or credit card, and wind up paying more during the term of your loan. But if you establish a good credit score, you can save money on interest payments and use the savings to invest in your future.

Credit also influences more than your ability to qualify for new financial products. Some employers may even check your credit report for potential red flags, like delinquencies or accounts that are in collections, before extending a job offer. The results of their credit inquiry may have an affect on whether they hire you or not.

Therefore, it’s important to build credit so you present your finances in the best possible way, whether it’s to a lender or prospective employer. Good credit gives you more freedom to qualify for the best financial products that can help you save money and achieve your goals.

Benefits of building credit

Building a good credit score is beneficial for many financial and life decisions. Here are some of the major benefits of building credit.

Better approval rates

If you have a good credit score, you’re more likely to be approved for credit products, like a credit card or loan. Lenders will look more favorably on someone with a 760 credit score versus a 550 credit score. That said, many factors are taken into consideration during the application process, including your income and employment status.

Lower interest rates

The higher your credit score, the lower interest rates you’ll qualify for. Low interest rates can save you hundreds or thousands of dollars on personal loans, mortgages and credit card balances.

Better terms

Good credit can help you qualify for the best terms on basically every kind of credit product. You may receive a higher credit limit on a credit card or larger loan amount on a mortgage. You may even benefit from longer terms on your loan, such as a 30-year repayment period versus 20 years.

With all of this knowledge, it’s time to look that credit score in the face and tell it that you will get it to 800 as soon as possible!! Let’s Get it!!