Your credit score is a rating that banks and other financial institutions use to determine how much money they can lend you, and at what interest rate. It has a huge impact on your financial health and on your life in general. Home loans, cell phone contracts, car finance… These all hinge on your credit score.
Why is a good credit score important?
You get access to more credit, and you qualify for better interest rates. The less interest you pay, the easier and faster you can pay off debt.
How is my credit score calculated?
Lenders look at various factors including your credit history and the amount of debt you currently have. If you have missed any repayments in the past, your score will suffer. Likewise, if you have lots of outstanding loans then your score will be lower.
Can I fix it?
Yes! It is never too late to start improving your score. The sooner you start, the better.
Here are six tips:
- Always pay your bills on time. Your payment history is one of the most important factors determining your credit score. Every missed payment has a negative effect –credit cards, store accounts, loans, insurance payments, utility bills… Use 22seven to create a budget so that you can set aside enough money and pay all your bills on time, every month.
- Do not spend wildly on your credit card. A high credit card balance can have a negative impact on your credit score, but at the same time some credit usage is better than none. Do not use more than 30% of your credit limit and pay your card in full each month, or as much as you can afford above the minimum required payment.
- Think before you apply. Every time you apply for credit, it is noted on your credit report. Too many inquiries in a short period of time suggests that you are scrambling for money, which can negatively impact your score. Only apply if you are serious about taking a loan.
- Monitor your credit score. Check your credit score regularly so that you know where you stand. Besides feeling empowered, you will also quickly notice any errors or potential fraud. There are a few apps out there that help you check your credit score. Ask around to find one that suits you best.
- Use credit wisely. With great power comes great responsibility… Credit can be a powerful tool for building wealth but only if used correctly. Do not max out your credit card, do not make late payments and do not apply for more credit than you need.
- Get professional help. If you are having trouble managing your finances, consider meeting with a qualified financial advisor who can help you consolidate your debt and structure a payment plan that works for you. EFS will gladly assist you.
The bottom line
Building a good credit score is essential for financial stability and independence. It takes time and effort, but it is worth it. You have got this!
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Source: 22Seven.com The 22Seven app is free and is a very useful budgeting tool. You can download it on Google Play / Appstore / Huawei App gallery.