There are many benefits of having a good credit score or working to improve your credit score. Your credit score is an important factor when it comes to getting accepted for loans, credit cards, car finance and mortgages. A better credit score has a range of benefits but one of the biggest is the ability to save money with a good credit score. Your credit score is all about your financial history and also your future borrowing. Potential lenders want to see evidence of responsible lending before they accept you for a loan.
Better interest rates
Having a good credit score usually means that you will be offered a better interest rate than those with bad credit. But why is it better to have a good credit score? Finance lenders are all about risk. If you have missed payments in the past, lenders will see you as more of a risk to not pay back your loan and may offer you a higher interest rate.
Your interest rate is the amount your lender charges you for borrowing money. When applying for bad credit car finance, your interest rate offered can be influenced by your credit score, your deposit, the length of loan term and interest rate type. Having a better credit score can lower your interest rate and the amount you will pay overall.
Build up a savings pot
A better credit score means that you can save money on a number of loans or finance deals you may already have. Saving more money means you have more to put into a savings fund. Having a savings fund can be really beneficial for your financial life. It means that if anything unexpected should happen such as loss of job, your car is involved in an accident, your precious pet needs emergency treatment or home repairs, you will have money to cover it. Alternatively, you can use your fund to pay any monthly payments, so you don’t miss paying them.
More negotiation powers
Working on your credit score whilst taking out finance is a great way to put yourself in a better position for finance. For example, if you are applying for a loan with bad credit, you may take a higher interest rate offered at the beginning and meet your payment schedule on time each month.
Building up your credit score with your current finance deal means that when you’re halfway through the agreement, you may consider refinancing a car loan and be offered a better interest rate. This in turn can save you money in the long run.
How can you increase your credit score?
Having a good credit score is great but what if you’re not there yet? How can you easily increase your credit score to start saving money?
- Pay all your bills on time and in full each month
- Reduce any existing debt before applying for any more finance or credit
- Prove your living address and verify your identity by registering on the electoral roll
- Check your credit file for any mistakes and make sure all your information is accurate and up to date
- Avoid multiple hard searches on your credit file in a short space of time.
- Keep your credit utilisation low by only using around 50% of your available credit limit.
- Consider a credit building credit card or mobile phone contract to build credit history if you don’t already have one.
- Check your credit applications on your credit file for any fraudulent activity.
- Close any unused credit cards, store cards and bank accounts that you don’t need
- Disassociate yourself from any financial links who may have bad credit