Most people on a journey to build wealth check their bank account balances daily. We even know the last coin in our wallets but we never give the same treatment to our credit scores. Just like your cash in hand or in the bank, your credit score is an important and integral part of your journey towards building wealth.
There are so many people who are against using credit, and for a valid reason. Some will argue that credit is like a plague and should never be acceptable under any circumstance. Well, I am not one of those people who share the same view.
Credit can be a powerful way to accelerate your wealth-building capacity. But you have to be really careful because when misused, this tool could end up ruining your financial progress. The goal of using credit to build wealth should be to pay as little interest as you possibly can and acquire more assets along the way. But the mistake most people do is using credit to fund their lifestyle.
What Is Credit?
For the purpose of this article, we define credit as something or a product that can be used and allow you to leverage other people’s money. This includes, lines of credit, credit cards, loans, and this list is inexhaustive!
By now, you have probably heard that improving your score can be beneficial to you. But the information that remains concrete is the real tangible benefits of a good credit score.
Credit.com says that a good score will range between 700 to 749 while an excellent score will start at 750 upwards. A person with a good to an excellent credit score will get good deals in the market. Anything that goes below 700 will attract higher interest rates in the market. The goal is to get a good or excellent credit score.
A strong Credit Will Help You Access Lower Interest Rates
A good credit score will make it easy for you to demand better interest rates in the market. With lower interest rates, you can easily buy high-value assets such as a home. In most cases with a good credit score, most banks will pre-approve you for any loans rather than you actually hoping to get the approval.
With debts and a good credit score, you can easily transfer the balances you may be having at a 0 percent interest rate which is an extremely easy way to pay off your debts faster.
Note: when actually considering transferring debts, it is important to first consider the transfer fee. At times, the balance transfer fee may be exorbitantly high making it less worth it.
It may look less significant at the moment, but lower interest rates can save you thousands of dollars.
Remember, the key thing about a good credit score is that it will help you qualify for lower interest rates, and with lower interest rates you pay the least amount.
A strong Credit Will Help You Gain the Upper Hand In everything
Sometimes you will go to get a loan and what they give you might not be favorable. This is where your credit score works like a charm to help you build wealth! When your credit score is high, and your credit history is incredible, you will have good leverage to negotiate for better loan terms including incredibly lower interest rates. A good credit score will not only help you get better deals out of the negotiation room, but it will also help you gain the upper hand during emergencies.
Sometimes the unexpected happens, throwing you off your financial plans. With a good credit score, you will easily leverage different financial options that you may otherwise not have access to, to work for you. This will help ease your stress and also keep you from losing more money than necessary.
Build Wealth By Paying Lower Insurance Premium Costs
Auto insurance companies will evaluate your credit and if you have a lower credit score, they will offer you higher premiums compared with the people with stellar credit scores, there is nothing you can do about it as these companies will justify their decision on the premise of probability and history.
The truth is, a person with a strong credit score will appear to be more honest and truthful and that he manages his resources appropriately. A lower credit score speaks the opposite of this. In addition, people with a lower credit score are much more likely to file for claims. While this is true for everyone, at times the insurance companies will use this fact against you if you have a low credit score.
If you must pay higher insurance premiums, the disposable income you’re left with will not be enough to cover your personal needs and investment needs.
A good credit score will help you qualify for business credit faster
More often than not, entrepreneurs will have the idea that they want to venture in, but not the capital to start it. It is a reality that most businesses will remain on the ground due to a lack of capital. With good credit, access to various business credit lines will accelerate your business pushing it beyond what you could have never expected. One other advantage of good business credit is that it is separate from your personal score. The business credit is linked to the businesses’ Employer Identification Number (EIN). These accounts will never be reported on your personal credit report.
Having good personal credit will enable you to skip a few steps in building your business credit. This happens through the trade lines and stores credit cards and this could take time, up to 24 months.
If you have a good credit score, it is easy for you to qualify for business loans, credit cards, and various lines of credit and all of these will help you get your business off the ground. Businesses before growing to self-sustenance will depend on your personal credit score to ascertain your low risk of default. This will revolutionize how you access finances for your business.