Guide

Home > Money Guide

Important Reasons to Clean Up Your Credit

There are three major credit bureaus in the United States: Equifax, TransUnion and Experian. Each one of these collects information about you when you apply for anything from loans to credit cards. To calculate your credit score, this information is collectively reviewed, and you’re given a number, or a rating, which is your credit score. This number typically ranges between 300-850, and the higher the number, the better. If you have poor credit, you may have a lot of difficulties with loans, renting an apartment, or even finding a job.

Benefits of a good credit score

If your credit score is on the lower side, you should strongly consider putting a plan in place that can enable you to effectively tackle debt and improve your score. There are numerous benefits to cleaning up your credit, some of which are often overlooked.

Having a high enough credit score can help you qualify for prime interest rates. This can help you save money with things like mortgages and car loans. If your credit score is 800 or higher, you may be eligible to get private offers with different terms than what's available to the public. In general, having decent credit is usually a firm requirement that lenders enforce for eligibility to begin with. But better credit, ultimately, can mean a better rate.

People with good credit are also more likely to get better insurance rates. Studies have shown that individuals with higher credit scores were less likely to file insurance claims than those with lower scores, so insurance providers tend to offer more favorable rates to those with good credit. A good credit rating can also give you access to the most competitive rates on utilities, including gas, electric and water/sewer service, in addition to competitive monthly pricing with various cell phone carriers.

Your credit score can even mean the difference between getting a job you’re interviewing for and not getting it; more and more companies these days are running credit checks on candidates before making any final decisions.

Ways to improve your credit

If you have bad credit and your goal is to improve it , there are a number of ways that you can increase your score. One way is to have a long credit history. This means that you'll need to apply for a couple of new credit cards and charge small amounts on them each month. Just don't go overboard because it's not good to have too many lines of credit available. Another way is to pay your bills on time, even if you can't pay the entire balance .Additionally, if you have to use your credit cards, make sure that you don't max out your cards. If you're not doing well financially, it might be a good idea to avoid using credit cards altogether.

You’ll also want to carefully look through your credit report, especially before doing something major, like applying for a mortgage. It can give you the opportunity to pay old debts you may have overlooked or dispute errors from your credit reports. These are all things you’ll want to do before applying for a large loan.

The length of your credit history is important because that's the other major factor in determining your score. Ideally, you should try to keep your oldest accounts open, even if you don't use them anymore. If an account has been closed for a while, the length of time decreases, so it's better to leave it open than to have a short credit history.

As you can see, having a good  credit score has a huge impact on your life. It's important to understand what goes into your credit score so that you can improve it and get the most out of what you deserve.