One of the best things you can do for your financial situation is to improve your credit profile. There are a number of people — from lenders to insurers to landlords to employers — who are interested in your credit history. Your credit report contains information that others use to make inferences about how you handle money, how reliable you are (especially when making payments), and even what sort of risk you pose.
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Without a good credit history, you could find yourself paying more money over time, and missing out on opportunities. Because your credit score is important, and based on information in your credit history, it’s a good idea to boost your financial reputation as it appears “on paper.” Here are 3 reasons to improve your credit history:
1. You Have a Better Chance of Being Approved for Loans
If you want to buy a home, you need a good credit rating. Lenders will look at your credit history, and use it to make a decisions about whether or not to lend you money. Mortgage lenders are paying a large sum to help you buy a house, and a default is costly to them. And, while auto lenders aren’t usually as picky as mortgage lenders, they still want to check your score and see what they can expect.
With a good credit history, you have a better chance of being approved for loans — and for better terms — than you would with a poor credit history. If you want to be able to borrow money for large purchases that you might have a hard time saving up for, your credit history is key.
2. You Can Save Thousands of Dollars During Your Lifetime
Your credit history isn’t just about getting approved for loans. Once your loan is approved, your credit score, which is a numerical reflection of the information in your credit report, will be used to help determine what interest rate you pay. A difference of even 1% can make a big impact on your wallet over the life of a huge loan, like a mortgage. A better interest rate means that you pay less over the life of your loan. Hundreds of dollars (and even thousands of dollars in the case of a mortgage) can be saved when you have a good credit history.
Savings due to your credit report aren’t limited to loans, though. You can also save in other ways. You might be required to pay a higher security deposit when renting. Additionally, insurers often look at your credit while determining premiums. With a good credit history, you could save money on your monthly premiums.
3. You Have More Financial Opportunities
While there are plenty of banks that don’t check your credit, there are some that do. You might not have be able to open the bank account you want, with your preferred financial institution, if your poor credit is used as a factor in determining whether or not to let you do business. Additionally, many would-be business owners are denied opportunities based on the information in a credit report. You can even find yourself passed over for a job based on the information in your credit history. Not all employers run a credit check, but some do — especially for sensitive positions.
And, of course, you can’t qualify for the best credit card rewards programs without good credit. If you want a better credit card, or chances to reduce your interest rate through other means, you need a good credit report.
If you take the time to improve your credit history, you will find more financial doors opened to you, and possible even save a great deal of money during your lifetime.