Swiping that credit card, paying off a loan or paying other types of debts all have one thing in common: They are all actions that are essentially building blocks that make up someone’s credit score.
As time goes on, a credit score can go through positive and negative growth, but why does an ideal credit matter so much? With an ideal credit score, there are plenty of benefits that one can enjoy!
Low interest rates on credit cards and loans.
The interest rate is one of the costs you pay for borrowing money and, often, the interest rate you get is directly tied to your credit score. If you have a good credit score, you’ll almost always qualify for the best interest rates and you’ll pay lower finance charges on credit card balances and loans.
Better chance for credit card and loan approvals.
Having an ideal credit score does not necessarily guarantee approval, but it does give someone an even better chance of being approved.
More negotiating power.
An ideal credit score could give leverage to negotiate a lower interest rate on something like a credit card or even a new loan.
Get approved for higher limits.
Borrowing capacity typically boils down to two things: Income and credit score, which is why one of the benefits of having an ideal credit score is that many banks would be more willing to let someone borrow more money the ideal credit one possesses shows that the person can be trusted with paying things on time.
Easier approval for rental houses and apartments.
More landlords are using credit scores to screen tenants, which makes it more necessary for potential renters to have an ideal credit score that saves the time and hassle of finding a landlord who’ll overlook damaged credit.
Better car insurance rates.
With an ideal credit score, most people could end up paying less for insurance than similar applicants who may have a more troubling credit score.
Get a cell phone on contract with no security deposit.
People with an ideal credit score avoid paying a security deposit could end up getting discounts on the latest phones by signing a contract. This is the case because it demonstrates trust to phone service companies on how more likely one will be able to pay on time.
Aside from all the positives that could come from having an ideal credit score, one thing to also note is how anyone who is looking to improve themselves and make a more ideal credit can make it happen! However, before we get into how to get an ideal credit, one must understand the major components that make for an ideal credit score!
What major components make up an ideal credit?
To keep things simple, the major components of an ideal credit can be broken down into 4 sections. These major components will demonstrate habits and practices that people do to have a consistent and ideal credit score:
Payment history- By making consistent, timely payments, it allows one’s score to continue to grow and make up much of that ideal credit score. Combined with the length of credit history, the detail and information on a credit report makes up almost a majority of what should be done for an ideal credit score.
Credit utilization- When it comes to things like credit cards, maxing them out is usually something that an ideal credit individual would not do. Wisely using credit and ensuring that limits are never exceeded demonstrates the growth and responsibly that makes for an ideal credit score.
Length of credit history- Basically, the longer the credit history, the more that one’s credit can grow. In this case, length does matter for a credit score because it tells lenders and others that the person has been able to keep up with payments and debts.
New credit and credit mix- Although this could technically be two different major components, they both work in tandem with each other to create ideal credit. Creating new types of credit lines or getting a loan diversifies how one grows their ideal credit. This also shows to lenders on the credit report that one can handle a variety of different payments.
These major components are what make up an ideal credit score. Want to know how to get that ideal credit? It’s easier than most people think!
How to improve and make an ideal credit for you!
Like the major components discussed, making an ideal credit comes from making good spending and saving habits, and letting time pass to allow one’s credit to form an ideal credit history! Here are just a few things that one can easily do to make ideal credit happen!
Pay on time- This is the go-to tip that will be vital on whether someone can get their ideal credit score. The more someone pays their credit card and loan bills, the more that credit score will grow as time passes.
Keep an eye on credit utilization- Although using a credit card is what makes that cycle of debt repayment work, maxing them out is a huge no-no. Know the limits of cards, and avoid higher interest rate penalties that could make it difficult to pay off these debts on time!
Have a good credit mix- As mentioned on the major components, diversification of one’s credit looks good on their credit history. Not to mention that lenders and agencies will be impressed by the different types of debts that a person can handle.
Promote long and healthy accounts- Showing off good-standing credit accounts that one has had for years will provide more growth for an ideal credit score. The longer that one remains consistent in my payments for their accounts, the better!
Watch out for too many accounts- On the other hand, too many accounts are not the best way of establishing an ideal credit score. In fact, opening multiple accounts could hurt someone more in the long, especially if one cannot keep up with the debts, which could then lead to a negative impact on the score!
Keeping these things minds will only help to create an ideal credit score that anyone could be proud of!