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Your credit score is one of the most vital statistics you could know about yourself. This criminally underrated metric dictates many of the financial hurdles you might face in life, as well as whether you’re equipped to face them or not. Without a good credit score, you might struggle to get a mortgage on a house, have difficulty getting accepted for a loan or a credit card, and even struggle to find a job.
Even though credit score is so important, many people still don’t know what their credit rating is or why they should improve it. We’ve put together a list of reasons why you should improve your credit score here, so that if yours is low, you can start taking the necessary steps to get back on track. For help with this task, check out this great video about improving your credit score and get started today.
Buying or renting a new home
Let’s start with one of the most fundamental things in life: buying or renting a new place for you and your family to live in. Purchasing property absolutely requires a credit check, and almost every bank or building society with whom you could take out a mortgage will want to carry out a credit check on you. This is largely to make sure you’re solvent and able to make repayments regularly and punctually; nobody wants to give a loan to someone they aren’t sure about, right?
In addition, renting a home, apartment or other property will almost always require a credit check, too, so you’ll want a solid credit score if you’re going to do this. It’s not just the buying or renting process itself, though; if you want to qualify for the lowest mortgage rates so that you’re not repaying back huge amounts per month, then having a favourable credit rating is definitely a good idea.
Applying for a loan
If you’ve got a bad credit score, then it stands to reason that many loan agencies and banks won’t want to consider you for a loan. After all, if you have a history of not being able to make repayments on loans, why would anyone consider you for a new one? It’s an unfortunate fact of life that bad credit begets more bad credit, but the fact is that an unfavourable history with loan repayments won’t look good for you in the future.
There are alternatives to a straightforward loan if you have a bad credit score, including guarantor loans and peer-to-peer lending. If you’ve never taken out a loan before, that can actually give you a worse credit score than taking one out and repaying it on time; companies like to see that you’re able to make repayments, and if you’ve never had a loan before, they have no indication that this is the case.
Starting up a business
When you finally fulfill your dream of leaving your 9 to 5 and starting up your own business, you may find your poor credit rating coming back to haunt you. Small business financing is a crucial part of starting up a business; without the necessary funds to procure stock or materials for your work, it’s going to be difficult for you to make headway in your chosen industry. Without a good credit rating, you’ll struggle to secure small business financing.
The logic here is very similar to personal loans. Companies and banks like to see that you’re capable of making sound, logical financial decisions, because a good head on the shoulders is paramount to ensuring a successful business strategy. With that in mind, make sure you take steps to improve your credit score before embarking on your business venture.
Buying a vehicle
There are many times when you might need to buy yourself a new car. Yours might have broken down on the way to work one day, or you might just be in the mood to replace an old car you’ve been driving for many years. When this happens, you might be tempted to take out a loan for the new car, or you might want to secure your old vehicle against the new one.
Believe it or not, this kind of transaction can often depend on you having a solid credit rating. If you don’t have a good credit rating, you might struggle to secure financing for your new vehicle. Don’t get stuck on public transport, or driving the same car you’ve been tolerating since you were young. Improve your credit rating and all options will be open to you.
Peace of mind
It sounds simple, but this factor just can’t be overlooked when you’re thinking about improving your credit rating. It just feels better to know you’ve got a good credit rating, to know that you won’t struggle with finding financial help and won’t need to turn to guarantors (not that there’s anything wrong with doing so, of course).
You may not need a loan imminently, but there might come a time when you do, and when that time comes you’ll thank yourself for taking the steps to improve your credit score before things got drastic. Your family will thank you, too, as you’ll be able to help them out of financial straits if they ever need you.
*Disclaimer – This is a collaborative post. This post has been pre-written.