By Ronni Peel
Having a credit score shows that you use your money wisely and can handle your finances when you are in debt. Since you will need loans for new cars, homes, and businesses, getting a high credit score can either help or hurt you. Having a bad score will likely make you unable to get a better interest rate for your loans, which means that you will have to pay more overall.
You will eventually need a home and a car, so having a high credit score can help you out with reaching your financial goals. Whether you have a great credit score right now or you need a little bit of help, there are many ways to raise that number and improve your chances of getting better rates for loans, and better home or vehicles, later on.
What is Considered a High Credit Score?
A typical credit score is between 500 and 750. However, with the highest score of 850, a high score is considered to be 700 and above. This means that you have an adequate credit history in your name, that you pay your bills on time, and that you don’t overextend your credit cards by using them too much.
Overall, this shows that you are responsible with your money. That makes you a low risk when allowing you to take out a new loan since you have a history of paying back the money on time. So, the higher you can get your score, the better off you will be.
Going from Good to Great
Do you have a good credit score between 500 and 700, but you want to get that number even higher? Well, that can be done, but you will have to put in some time to make it happen. So, here are some reasons why your score is not rising fast, and ways that you can boost it to get it higher.
Not Enough History
If you are young and only have a few bills, then this is one main reason why your score is not that high. Even if you have never missed a payment, you are still building your credit. So, if you want to raise your number faster, you can use your credit cards to your advantage. Checking your credit score through credit score api will also help you keep track of this journey.
Opening a line of credit and using it will help your score if you pay it off. The trick is to use it for things that you need to buy anyway, like gas or food, then paying it off at the end of the month. This will ensure that you don’t need to pay interest in your purchases, but you get to build your credit by making on-time payments.
Too Much Debt
You don’t always see the debt that you have, and you might not realize how much you have. This means that you could be paying down your debt without getting a big boost to your credit score. This is likely because you still have over 35% of your total credit amount used. If you use more than that number, then you are likely spending too much for the amount you make each month, which means you are not great with money.
If you are paying down that debt and still have a lower score, you just need to start paying more into that amount. This will help boost your score faster instead of having to wait years for it to increase. And, keep track of all the debt that you owe, so you know how long it will take you to pay it all off.
Outstanding Loans
Some loans are necessary, like to purchase a car or home. Most people cannot afford to pay for these purchases in cash and need a loan for financing monthly payments. This a loan that most people will have on their credit history, and won’t affect your score too much if you choose a car or house that is within your budget.
However, if you have multiple loans for different cars, this will add up. It will also lower your credit score by adding to your debt. Even if you can afford to do this, you want to pay more upfront to help pay off the amount sooner. Paying extra on monthly payments can also make a difference.
Conclusion
Having debt is just a part of life, but having a good credit score will help you get rid of that sooner rather than later. Prioritizing your finances to pay off your debts will help boost your score, and keep you at a high number.
This will allow you to make special purchases for luxury items or upgrade your home or car. Financial freedom can be achieved when you have less debt, and having a high credit score can help you reach that goal.
