Credit score. It’s important. Essentially, credit score is a tool used to determine how well someone will repay their loans. It also determines if a loan should be given in the first place and at what interest rate (investopedia.com). So, I’m sure you must be asking yourself, well how is it calculated and how is it built? I’lltell you.
There are five pieces used to calculate the credit score. Payment history, how much you owe, the length of your credit history, the types of accounts you have, and recent credit history (wellsfargo.com). To learn more about the specifics, I recommend visiting this article from Wells Fargo. It offers detailed information about the credit score.
A good credit score is quite helpful when purchasing a home. For example, when buying a home, you need money. Banks are willing to lend you the money if they feel you’ll pay it back. Well, a good credit score allows you to be eligible for more money and lower interest rates for the home. A home can have a big impact on your life. So, a solid credit score is quite important. If you want to look more into it check out this article from Forbes (forbes.com).
A good credit score is also crucial when purchasing insurance. Insurance companies will check your credit score to decide whether to provide you coverage. Furthermore, they use it to determine how much to charge you. Once you have insurance the company will continue to monitor your score and decide if they need to raise the price. Therefore, a solid credit score is important when buying and using insurance (capitalone.com).
Good credit score is also important when applying for utilities such as electricity or internet. In fact, the better the credit score you have the easier it will be to get these services. So, it is clear a good credit score is needed for an easier path to buying utilities (capitalone.com).
Now, let’s jump into what a good credit score can do for a rising investor. It can raise your access to capital, lower your given rate of interest, and help you leverage the given assets.
So, how can a good credit score increase your access to capital? Well, a good credit score gives banks more trust in you. So, they feel comfortable with giving you more money (thebalance.com). The more money you are given the more possibilities you have.
Along with that, a good credit score lowers your given rate of interest (thebalance.com). A lower rate of interest is something that everyone wants. It’s less money to pay back to banks.
A good credit score also allows you to leverage these assets. This means that you can take the money you burrow and invest it in stocks, businesses, real estate, and more to increase the amount of money you burrowed, pay that back, but also make a profit (investopedia.com). Check out the article I included from Investopedia. It explains in detail how to leverage your money using your credit score.
It’s clear that a solid credit score is important to build and maintain. So, I want to conclude the article by providing you with an article from CNBC and an article from the balance (cnbc.com) (the balance.com). CNBC explains four ways to boost your credit score. The balance explains how to maintain a good credit score. These articles were extremely helpful to me, and hopefully they can empower you too.