Four Reasons to Protect Your Credit Rating
Credit health influences nearly every aspect of your financial life. With positive references and a track record of responsible credit management, you are well-equipped to fund major purchases and enjoy flexible access to various forms of financing. On the other hand, a history of default, late payments and poor credit outcomes can haunt you for years – even after you’ve changed your ways.
It is never too late to get back on track, so don’t dwell on past indiscretions. Instead, do everything in your power to advance your credit status and develop a positive credit rating – your financial health depends on it.
Your Credit Score is an Important Number
Lenders use reports from several reporting agencies to measure your creditworthiness. Performance is typically distilled to a single number credit score, furnishing at-a-glance references for creditors reviewing applications. Credit scores are not the only metrics used to measure credit strength, but the number serves as a snapshot of your financial past.
As you formulate financial decisions, remember these important reasons to make your credit score a priority:
Access to Financing – Creditors grant loans and other forms of funding based on the level of risk associated with each transaction. Presenting yourself as a risky borrower automatically works against you in competitive lending markets. Without a proven track record repaying debt and making good on financial contracts, creditors must assume the worst. And with so many other well-qualified candidates competing for the banks’ attention, a poor credit score quickly closes doors. If your strength of credit doesn’t measure up, you may be required to add a guarantor to qualify for a loan. The added measure of security provides a safety net for lenders, in case you default. Guarantor loan rates vary, but like other forms of alternative financing, terms may not be as attractive as conventional loans.
Best Credit Rates and Terms – Access to the best rates and terms is earned over time, so it is never too early to start building and preserving your credit rating. From a young age, each account you open and every contract you sign become part of your permanent financial history. Use these opportunities to build credit health, which translates into future buying-power and preferred credit benefits. By paying your first car note on time and successfully managing a revolving credit account, for instance, you show creditors what to expect from you in the future. And as you continue to reinforce these positive credit outcomes, lenders respond with the best available financing offers.
Emergency Funding – Despite the best financial planning, unexpected setbacks are a natural part of personal money management. Job loss, medical emergencies and other unanticipated costs can have an immediate impact on household cash flow. If the bottom does fall out, your strong credit rating can help carry you to firm financial ground. Without a good score, however, options are limited, when it comes to securing emergency funds.
Convenience – Fast-paced modern living is centered on convenience. Credit cards and various forms of electronic payment make life easier for users, but the privilege is reserved for those with good credit. Like prepaying at the gas station, navigating all your transactions without the benefit of good credit is inconvenient and time-consuming. Mobile phone contracts, for example, are secured by credit references. Without a reasonable score, you’ll be left with prepaid alternatives to fund as you go. Rental cars and other travel accommodations are typically secured an billed through revolving credit accounts, so travel plans are also impinged by a damaged credit history. Even basic utility services for gas, electric, and ground telephone connections are
Like it or not, your credit rating serves as a lifelong companion, following along as you build financial relationships. With each successful encounter, your credit score grows more powerful, opening doors to further financing opportunities. Falter, however, and you’ll face an uphill climb restoring your creditworthiness. To avoid problems, commit at an early age to protect and preserve your credit rating, and reflect on these important reasons to make it a top priority.