How To Build Your Credit & Why You Need It
Contributions done by Justin Martz & JW Rayhons
According to Investopedia, “Your Credit score is a number between 300–850 that depicts a consumer's creditworthiness. The higher the score, the better a borrower looks to potential lenders. A credit score is based on credit history: number of open accounts, total levels of debt, and repayment history, and other factors. Lenders use credit scores to evaluate the probability that an individual will repay loans in a timely manner.” This score, ranging becomes an important part of your life as you grow, experience life and need credit.
The reason for this is because your credit score is an indicator of your financial health. It is a reflection of how well you use credit and your spending and repayment habits and history. Your credit score will determine your ability to get credit and what terms you will have. A good credit score can help you with the ease of getting credit when needed and will save you money by getting the best interest rates possible.
Ways to establish and maintain a good credit score:
It is important to establish credit and to create good habits. A secured credit card or one with a low limit is a great way to start building credit and to learn good spending and repayment habits.
Pay Bills on time:
It is important that you pay your bills on time, even if it is just a minimum payment. Setting up alerts or using auto pay are great ways to ensure you are not late making payments.
Pay off debt and keep balances low:
It can be easy to rack up balances on credit cards and to have multiple cards you are using. It’s important to keep your balances low and to not max out your cards.
Apply for new accounts as needed:
It can be tempting when you receive offers for new cards with low rates and incentives, or a discount from a retail store. It is not helpful to continue to apply for new cards. Only apply for what you need. Every inquiry on your credit hurts your score and having too many cards isn’t helpful either.
Credit is a big part of our lives.
It’s important that we establish it and learn and maintain good habits regarding our credit. Our score can help us gauge how well we are doing. Hopefully these tips will help you think about how you are using credit and how you can improve your score.
There’s more to life than money! The Rayhons Financial family are professionals that want to help you. Connect with us for an initial conversation, call us at (480) 507-2425 or contact us online. We’d love to meet you.
Justin Martz is a Non-Registered Associated Person with Voya Financial Advisors. Justin cannot offer securities or advisory services.
The content in this article was prepared by the article’s author. Voya Financial Advisors, Inc. does not endorse its content, and the views expressed may not necessarily reflect those held by Voya Financial Advisors, Inc.