Building credit is one of the most important things you can do for your financial well-being. Whether you're just starting out or you've had credit for a while, it's important to understand why building credit matters and how it can impact your financial future. In this blog post, we'll explore some of the key reasons why building credit matters.
One of the most important reasons why building credit matters is that it can impact your ability to get approved for loans. Whether you're looking to buy a car, a home, or even finance a small business, lenders will look at your credit history and credit score to determine your risk level. If you have a low credit score or a spotty credit history, lenders may be hesitant to approve your loan or may offer you less favorable terms.
For example, a local car dealership will run your credit in order to see what kind of loan rates and length you are eligible for.
Another reason why building credit matters is that it can help you get better interest rates on loans and credit cards. Lenders use your credit score and history to determine the interest rate they will offer you. The better your credit, the lower your interest rate will typically be. This means that you'll pay less in interest over the life of the loan, which can save you hundreds or even thousands of dollars.
Having good credit can also increase your borrowing power. This means that you'll be able to get approved for higher loan amounts or credit limits. For example, if you have good credit, you may be approved for a larger mortgage or be able to get a higher credit limit on your credit card. This increased borrowing power can help you achieve your financial goals and can give you more flexibility in your finances.
For instance, when working with a reputable car dealer, by having a good credit score you will be able to have a larger borrowing loan amount so that you can buy a higher quality vehicle or your dream car.
Your credit history can also impact your insurance premiums. Insurance companies use your credit score to determine your risk level and may offer you lower premiums if you have good credit. This means that building credit can not only help you save money on loans and credit cards, but it can also help you save money on insurance premiums.
Finally, building credit can be important if you're looking to rent an apartment. Landlords often check credit histories when screening potential tenants. If you have poor credit, it may be harder to get approved for an apartment, or you may be required to pay a larger security deposit.
In conclusion, building credit matters because it can impact your ability to get approved for loans, get better interest rates, increase your borrowing power, lower insurance premiums, and even help you rent an apartment. If you're just starting out, consider getting a credit card with a low limit and making regular payments on time. Over time, you'll build a solid credit history that can help you achieve your financial goals.