When it comes to financial goals, building good credit might not be the first thing on your mind. But let us assure you, it’s a crucial aspect worth your attention. Good credit isn’t just a luxury in today’s economy; it’s a necessity. Your credit score holds incredible power, shaping whether you can achieve dreams like owning a home, driving that dream car, or landing your ideal job. It’s more than just a three-digit number; it’s the key to making your financial dreams come true.
So, what exactly is a “good” credit score? To understand that, let’s break down how credit scores are calculated. Most lenders use the Fair Isaac Corporation or “FICO” score model. These scores range from 300 to 850. A good FICO score is generally considered anything above 670. The term “risked base” pricing is used to identify how, depending on your credit score, what rate you will receive when you are looking to secure a loan, or a credit card.
For FICO, the score is calculated based on five key factors and their respective weights:
- Payment History – 35%
- Amount Owed – 30%
- Length of Credit History – 15%
- New Credit – 10%
- Credit Mix – 10%
Now, let’s explore how having good credit saves you money and opens doors to more financial opportunities. Maintaining a solid credit score doesn’t just help you keep more money in your pocket; it shows lenders, landlords, and employers that you are trustworthy and reliable. StreicherTeam is not only interested in helping clients obtain homeownership, we are focused on overall financial literacy.
Here’s how good credit can save you money:
- Borrow or refinance loans at better interest rates: A solid credit score allows you to borrow money at better rates and terms. This means potentially saving thousands of dollars in interest payments over the life of your loan. With good credit, you have access to more loan options with lower interest rates, flexible repayment terms, and favorable conditions.
- Qualify for better credit cards with rewards and discounts: Good credit opens doors to top-notch credit cards offering exciting rewards and discounts. Imagine earning cashback on your everyday purchases or enjoying exclusive perks, discounts, and travel benefits, all thanks to your good credit.
- Be approved for certain jobs and security clearance levels: Your credit score can impact your career prospects. Certain jobs and security clearance levels require responsible financial behavior. By maintaining good credit, you increase your chances of securing these positions, potentially boosting your career and salary prospects.
- Negotiate better terms on rental properties: A good credit score impresses landlords, showing them you are a responsible tenant likely to pay rent on time. This advantage can help you negotiate better lease terms and potentially secure a lower rental rate and security deposit.
- Get cheaper insurance: Insurance companies consider your credit score when determining premiums. Good credit can lead to lower insurance premiums for your car, home, and renters’ insurance. Lower premiums mean more money in your pocket for other financial goals or building an emergency fund.
The great news is that credit scores are not set in stone. If you need to rebuild bad credit or establish a stronger credit history, there’s much you can do to improve your score over time. By understanding the importance of good credit and actively working to improve and maintain it, you unlock a world of financial possibilities and secure your financial future. Building good credit is a journey well worth taking for a brighter and more prosperous tomorrow. The StreicherTeam is always available to assist clients that are attempting to build, rebuild, or repair their credit profile. Book a one on one appointment with a professional at StreicherTeam.com and we can point you in the right direction to building your future.