Managing your financial standing is important even if you aren’t in the market for a loan. The cost of a bad credit score lingers in the shadows waiting to strike when you least expect it. That could be when you need new wheels pronto or finally find the house of your dreams. Managing your financial standing is important e
Life with a bad credit score gets expensive quickly. If your score is in the basement, you’ll be forced to hand over more of your income for less benefit. The cash-leeching beast that is a low credit score can be tamed. Knowing how your credit score plays into daily life can help you manage it.
1. Getting the Best Price for Essentials
In life, some things are vital, like food and water. And as an adult, you soon discover that there are fewer tactile essentials required to have.
One is car insurance, which drivers are mandated to have by law. The amount you need to have varies based on state regulations, car ownership status, and driving record. Beyond the standard actuarial criteria insurance underwriters use to assess the risk of you at the wheel is your credit.
Skip the pain of overpaying for insurance by striving toward a good or better credit score rating. Skip the annoyance of overpaying for insurance by striving toward a good or better credit score rating. Drivers with poor credit can be considered at higher risk because bad money management may indicate bad driving habits. Generally, this range reduces the likelihood of paying increased rates.
If you don’t have much credit history, now is the time to create a solid track record of good money habits. Open a credit builder card to build a history of responsible credit use and on-time payments — essential factors in your credit score. Because they’re secured with an initial deposit or funds transfer, these special cards typically skip the credit check, making them easily accessible.
2. Keeping More Money in Your Pocket
Every time you turn around, someone is asking you for money. Whether it’s your kid’s school launching yet another fundraiser or skyrocketing rates for basic services, cash quickly disappears. And if you’re living with a low credit score, you’ll be paying extra for the cost of major, necessary expenses.
A credit score is one of the most common ways a business can determine whether to work with you. Many people can seem kind, trustworthy, and responsible in person, but it doesn’t always paint a clear picture. First impressions can cloud judgment and override accuracy if a financial transaction is involved.
While some services may not be denied outright, they may require a co-signer with a better credit score. While some services may not be rejected outright, they may require a co-signer with a better credit score. That’s why major financial commitments like lease agreements, loans, and even jobs involve credit scores to vet candidates. Even lower-cost, necessary line items like cellphone service and utilities entail a credit check. Other times, service providers demand a high-dollar deposit to help manage their risk in agreeing to serve you.
Usually, your deposit is held with the company you’re working with until you part ways. That means the two months’ rent you’ve handed over can’t be used to cover an unexpected expense. If you’re already required to make deposits to counteract your low score, you’ll likely have laid out thousands of dollars. Now, you’ve drained your cash reserves while other renters enjoy greater financial freedom thanks to their good scores.
3. Having Your Choice of Financial Products
The ability to say yes to life’s great opportunities can have lasting impacts. While saying yes to everything can lead to financial challenges in the form of maxed-out credit cards, yes can mean more.
When it comes to your credit, a good or better score means you can get easy approval on loan. If you’re shopping for a new car, you can find a great deal and enjoy a low borrowing cost. With a lower interest rate, you’ll pay less for your transportation over time. These monthly savings can help you invest, save for a vacation, or create an emergency fund.
While some buy-here-pay-here car lots can help customers access essential transportation, they aren’t always a great buy. These dealers often sell cars for more than their value and charge interest rates to state maximums. Quickly, your overpriced investment in a depreciating asset can drain your account balance, especially if the vehicle is in disrepair. On the flip side, your low credit score may force you to shop where they specialize in high-risk clients. On the flip side, your low credit score may cause you to shop where they specialize in high-risk clients.
Instead, consider your pursuit of improved credit to be more than a status symbol — solid credit saves you money. After boosting your score, you can apply for credit confidently, knowing that you’re the type of client lenders want. Plus, you can shop for credit where you want and leverage better negotiating power since you’re not reliant on in-store financing. Thanks to your great credit score, you’ll get the best loan terms and overall investment.
View Your Credit Score as a Key Indicator of Your Financial Wellness
Just as you undergo an annual wellness exam with your healthcare provider, so too should you routinely assess your financial wellness. While you may not be in the position to hire a financial advisor, you should maintain a personal financial dashboard. Log your current credit score, account balances, and debts to get an at-a-glance view of where you stand. If there are improvements you’d like to make, you’ve got an easy visual to reference and update over time.
At the forefront, your credit score indicates how well you’re meeting your commitments. Be a good steward of your resources by managing your credit while pursuing your financial goals. Solid money management leads to less stress, which makes credit management one of the most important things you can do.