If you think your credit score does not affect your financial life, you might want to reconsider that stance. Without a fair credit score, you are hurting yourself financially in the long run. Every credit report consultation organization believes that credit is your financial power, and for a very good reason.
If you fix your credit report or have fair credit from the start, you can get an unsecured credit card, a personal loan, and even your dream car. However, you’d get it all with the promise to pay later.
What are the credit origins? – FICO scores and reports
Your credit report is one thing that consumer reporting agencies use to calculate your worthiness of getting a loan or a new credit card. The nationwide-popular reporting agencies are Experian, Equifax, and TransUnion.
Now let’s hope on to FICO scores.
What is the FICO score?
FICO is a common credit score-calculating formula and it ranges from 300 (extremely low) to 850 (fairly high). The higher your FICO score, the greater your chances to get approved for a personal loan or a new credit card.
Although many factors are considered by agencies to calculate your FICO score, they have not disclosed them yet. Moreover, each agency can evaluate differently and present you with a different score.
What are the mini requirements to get a FICO score? – How can I build my credit?
There are 3 requirements to get a FICO score. First of all, you need to have a credit report that suggests to every lender out there that your score has not decreased ever since.
The second-most important requirement is that you should have an account that is 6 months old or more. The last requirement is that you must have a credit account that had been reported to the credit-reporting agencies.
However, if you can’t satisfy the second requirement due to limited or zero credit, you can always apply for a credit-building loan.
What are the reasons to boost my credit?
Avoiding building credit puts you in a complicated financial position. Here are 5 reasons why a fair credit score helps you become financially independent:
- You can apply for a job
- You can apply for a new credit card
- You can refinance your existing debts
- You can rent an apartment
- You can buy a home
Renting an apartment easily
A landlord can easily depict from your credit report if you are a good tenant who pays on time or not. Many landlords or housing managers now request a credit score. However, if you don’t show them your score, they are likely to ghost you. It scares the landlords away as they don’t want to take risks.
However, there are other ways to convince the landlord to take you as a tenant. To establish faith, you can pay the rent for a couple of months as a security deposit. But if you have a score of more than 750, you can only pay the rent for 1 month.
Other than the landlords, the utility companies also check your score. However, you can get past this inconvenience by co-signing or submitting a security deposit. But make sure the co-signer knows he/she has to pay the bills in full amount if you don’t pay.
You can buy a home
Mortgage lenders are challenging to find when you have a bad FICO score. As it takes a long time to establish a good credit score, you would have to pay high interest.
Unless you inherit a huge amount of money from your parents, you need a good credit score to afford a house.
You can refinance the existing student loans
You have a chance to build your credit score if you have been already paying off student loans. Once you establish a fair credit score, you can get a better interest rate so you can pay off faster.
A good credit score always helps to save so you can spend as per your budget. However, if you are in no position to repay your debt due to the pandemic, you can always go to the number 1 credit repair company in the US and discuss your options.
You can get a new credit card
If you are an anti-credit card person, I understand your stance. However, it is all about spending the money responsibly so we can avoid debt. The best way is to keep a low limit and to pay your bills before the due date.
A credit card is the best option to shop online or to get your favorite car. It is better not to use a debit card because if your number gets stolen, your money would be drained out of your account in no time.
If you want to start from scratch, there are many options to go for such as getting a secured credit card, a student credit card, or becoming an authorized user.
You can get employment
A desolate or bad-looking credit report won’t land you a job. It sends a message that you won’t be as responsible at the work as others with a good credit score. Moreover, employers under the influence that this factor would affect an employee’s work performance.
Now that you know the utmost importance of credit in your financial life, you can get on the boat by applying for a secured credit card.