Number One: Why your credit score is so important
Posted By: Matt in Credit on 09/18/2017 at 12:52:31
Do you ever find yourself, from one day to the next, overlooking one key piece of financial information·
Sure, you might have your eyes squarely set on a better budgeting process, cutting some expenses and even making sure you're padding your retirement to the best of your ability. But perhaps as part of all this improvement process as it relates to money, you've forgotten about three very important digits.
Say hello to your credit score.
This three digit number is your code to financial freedom that you wouldn't believe, and your credit score almost is the summary of all you done money wise. That score reflects everything from your debt to income ratio, how much debt you carry versus your debt ceiling (often referred to as debt utilization) and if you're a liability as a borrower in the eyes of a lender.
The lending part is extremely paramount when you consider aspirations of buying a house or car and wanting to have an interest rate that isn't out of the realm of what the going rate is at the moment.
The reason the credit score gets overlooked is because it's not your bank account and isn't as highly visible as it should be. In order to keep your score at a point where you'll be looked upon by potential lenders as a viable candidate for a loan, you don't have to do anything crazy or be all consumed with knowing your score.
What needs to happen are two very distinct and relatively simple things: check your report and don't miss any payments.
Granted, you want to stay on top of other aspects of debt and credit, such as having too much of the former and thus negatively affecting the latter. You also have to make certain you're not carrying a balance on a credit card that is too close to what the total amount owed would be, such as a $10,000 card limit with $9,000 of a balance.
But to keep things easy, make sure (even if it is the minimum amount due) that you're always paying your debt and credit on time. Paying late is going to put a serious dent in that score and if that late payment reaches 30 days, it also will extend into your report and not only knock down your score significantly but also become an amount of money that will go through a collection company.
And if you're not consistently checking your report, how will you know if it is accurate or not· Credit scores and reporting can have mistakes on them, so being up to date on that score and the information that comprises it is key.
In the midst of your budget preparation, expense auditing and other money related matters, don't forget about the all important credit score and how it can impact your finances just as much as anything else.
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