I remember sitting around a bonfire one cool autumn evening with a few close friends from high school. We had all gone our separate ways after graduation, some of us went to acquire our degrees immediately, others went off to the military and some went to trade schools to prepare themselves for an apprenticeship. As we regaled about our experiences, told stories from our teenage years and recalled adventurous moments in our time away, we somehow landed on the topic of credit. Sam, a particularly astute mutual friend of the group, mentioned that he was attempting to buy a home with his wife, and they were both struggling when it came to acquiring a loan. “It’s not like we don’t make enough money and we don’t have any negative items on our credit report” Sam sighed as he fiddled with a stick he pulled from the fire. “Besides my school loan, I just pay cash for everything; why do I need to borrow money if I have enough to pay for something?” As I scanned across the orange lit faces of my peers, I had a general realization… everyone had the exact same mindset! Each of my friends added their own experiences of how they faced some sort of setback due to their underdeveloped credit portfolio or their lack of credit in general. In today’s blog, we will go over 4 reasons why you should really focus on your credit score as early as possible.
1- Credit Takes Time to Build.
When it comes to building credit, think of it as bodybuilder training for performance physique; it doesn’t happen overnight, and it takes time and understanding to get the results you want. The longer you wait to focus on your credit portfolio, the harder it will be to build or correct your credit. The earlier that you build a solid foundation of positive credit, the easier it will be to add additional positive lines to the account.
2- The Higher Your Score, The Better Your Rates.
Your credit score directly impacts what kind of interest rates you will qualify for when searching for a new credit card or when looking to borrow money from a lender. A quick example of this come from my good friend Greg. He purchased a new truck back in 2018 with a small trade in and a credit score in the lower 600s with a high interest rate. When we sat down to look at at his loan, even though he was scheduled to pay off his loan early, in interest alone, he would be paying an additional $6,000 on top of the original loan! After crunching the numbers, we found that if his credit score was just 45 points higher, he would have qualified for a loan with less of an interest rate and he would only have to have paid an additional $3,800 in interest instead.
3-What Happens If There Is an Emergency?
Even if you have a solid savings account built up, there may come a time when an emergency arises that requires a substantial amount of money to take care of. Just one unexpected medical bill or major home repair can completely drain your savings and may require you to take out a personal loan from your bank or lender. A better credit score can help improve your odds when it comes to a lender approving you for a loan and when you really need that financial assistance quickly, you don’t want to be stuck scrambling with different companies who continue to deny financing due to a low credit score.
4- Perks, Perks, Perks!
Having an established credit score comes with many different perks than what is listed above. When you have a high credit score and a developed credit portfolio, many lenders would love to have you as a borrower. Credit cards have a multitude of perks added on to them: cash back rewards, sky miles, cash reward bonuses, sign up bonuses and hotel perks are just some of the benefits offered by some of the more “elite” credit cards out there. The better your credit score, the more of these cards will be available to you!
Don’t Ignore Your Credit
Thinking back on it, I wish that I had known the benefits of a developed credit portfolio and a good credit score when I had gotten out of high school. If I had started working on my credit from an early age, then I would be set with a plethora of benefits and perks in my adult life.
Just because you started focusing on your credit later than others, or you are wanting to start focusing on your credit today, does not mean that you are out of luck. Our seasoned team here at Credit Law Center strives to help teach and guide clients to repairing and rebuilding their credit and get on the road to better credit. If you have questions about your credit report or want guidance on just how to get your credit in order, click here for a free consultation.
