Like many others, you may have found yourself setting various goals that you want to achieve in 2021. For a lot of people, those goals tend to be oriented towards personal health. There’s more to health than just your physical health though. There’s the mental component, of course, but there’s also personal financial health. One of the things you can do to boost your financial health is to increase your credit score.
Raise Your Credit Limit
If you’ve ever found yourself wishing you had a higher credit limit, increasing your credit score can be the answer. Having a higher credit limit gives you more resources you can use if the need arises. Additionally, you have more wiggle room in your credit utilization with a higher credit limit. Your credit utilization is one of the five things that are used to determine your credit score. The general recommendation is tokeep your credit utilization below 30%. With a higher credit limit, you have a greater degree of flexibility in how much you can spend while still keeping your credit utilization low. This, in turn, helps improve your credit score.
Qualify for Financing
When you have a higher credit score, lenders will perceive you to be capable of making smart financial decisions and good at managing money. Therefore, they are more comfortable with lending you more of their money. This is especially useful if you find yourself in need of a personal loan. There are many reasons why you might need a loan in an emergency. With a better credit score, you have a better chance of qualifying for the financing you need to cover emergency expenses.
Reducing Your Interest Rate
Nothing is free in life, especially when it comes to money. The interest that comes with loans and credit cards is the price you pay for borrowing money. It’s how those you borrow from make a profit. The interest rate you have to pay is impacted by your credit score. The better your credit score, the less of a risk you are perceived to be as a borrower, and the lower your interest rate is likely to be. If your credit score is low, your perceived risk is higher, and you’re more likely to be charged a higher interest rate. It’s an attempt by the business to make sure they can recoup as much of their money as possible, should youdefault on the loan.
Increasing your credit score is an incredibly worthwhile goal that you should make a priority in 2021. Doing so can raise your credit limit, allow you to qualify for financing, and can land you a lower interest rate when you borrow money. It’s not going to be an overnight change and will take time and effort, but the benefits of having a high credit score are worth the work.
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