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In 2023, the average credit score in the United States is 714. Considering the state of the economy, that’s not a bad average. If you fall below that average, it may be time to consider making active moves to increase your credit score.
The lower your credit score, the more likely you are to miss out on access to financial resources and other crucial aspects of life. You even get higher interest when you are deemed a “risk”. Here are a few reasons you need to improve your credit score and some tips on how to do that.
- Higher credit improves your chance of getting out of debt efficiently.
The higher your credit score, the lower your interest rates. This means you’ll be paying lower finance charges and may even have an easier time getting rid of your existing debts. So, whether you have credit cards or loans, you’ll be paying less at a time and overall when you have a higher credit score.
It’s important to keep your relationship with money in check to ensure that you aren’t sabotaging yourself. When you review your expenditures, you want to make sure that you are paying off debt on time and not delving into actions that unnecessarily sink your score. When you get your finances in order, the more manageable it is when you do accrue new debt in the future.
- A good credit score makes you more inquiry-ready.
Many essential things in your life will require a credit inquiry, like applying for a mortgage, trying to get a loan, getting a credit card, certain job interviews, and even renting a place. A guide to hard vs soft credit checks notes that hard credit checks can lower your score by up to five points at a time, with too many at once even reducing it by 50 points.
Make sure you don’t take on too many applications that require hard credit checks within a short span of time. The benefit of having a good credit score to begin with is that having a few inquiries at once won’t really hurt your score to the point that it’s counterproductive. You want to be able to pursue these essentials without feeling like the credit check alone will hurt your financial history. Make sure you review your credit reports to keep tabs on your lines of credit and existing applications.
- Your credit score will help you get approved for loans.
There are certain times in your life when a loan may be unavoidable. Perhaps you have an unexpected emergency or you want to take on a major purchase like a house or car. Beyond that, you may even try to use a loan for debt consolidation. 31 percent of Americans that take out loans do so to get out of debt.
Lenders use your credit score as a basis to determine whether or not you are reliable in terms of paying back debt and financial habits. If you have a high credit score, they are more likely to approve your application. If you limit your credit utilization and continue to pay existing debts on time, you will improve your score and have a nice-looking credit report, effectively upping your chances to get that loan.
When you take the time to understand the value of improving your credit score and actively try to do so, you are essentially opening up more opportunities and freedom in your life. With actions that will inevitably contribute to your financial wellness, you can eventually achieve peace of mind free of built-up expenses.