One of the realities of finances is that many lenders and other financial product and service providers want to know your credit score. Your credit score is essentially a summary of how you handle your money. The higher the score, the better deal you will receive, whether it’s a lower interest rate on a loan or a better quote on your car insurance.
Excellent credit can mean saving tens of thousands of dollars over your lifetime. In some cases, especially with mortgages, you could potentially save hundreds of thousands of dollars over the course of 30 years.
What Results in an Excellent Credit Score?
Many consumers don’t think it’s fair that the credit score has become a stand-in for financial responsibility. The argument is that truly good financial habits don’t require you to borrow. For the most part, a credit score only measures how well you have handled your loan obligations. If you don’t borrow, you don’t end up with a credit score. So, unfortunately for some, the first step to building an excellent credit score is to apply for — and obtain — credit, usually in the form of loans.
Once you have loans, your next step is to make all of your payments on time and in full. You don’t need a ton of loans to build up to excellent credit, though. Usually, it’s sufficient to get an installment loan (make the same payment each month to pay off the loan within a set period of time) and a revolving loan (like a credit card). If you are careful to borrow a small amount and make regular payments, you will start building your credit history. It’s important to be careful to incorporate any credit spending into your regular financial plan so that you don’t get in over your head with debt.
There are different credit scoring models, but most have ranges between 350 and 850, or something similar. In many credit scoring models, you need a score of at least 720 to 740 to be thought to have excellent credit. When you have excellent credit, you usually qualify for all the best rates. And, as long as you have enough income to afford your payments, you shouldn’t have trouble qualifying for just about any loan.
If you want to get good deals, from qualifying for a good apartment without paying a large security deposit, to getting the lowest mortgage rate, cultivating excellent credit is a necessity. Want to find out what’s in YOUR credit report and score? Get started with Quizzle today and get your free credit report and score, no purchase or credit card necessary!
