Credit score is a measure of how trustworthy a person is as a borrower of money. Financial and lending institutions looks at your credit score when deciding to let you borrow money from them. People with good to very high score don’t face many hurdles borrowing money since they are good payers based on their history. Credit score ranges from 300 to 850. Between 670 to 740 is considered good and between 740 to 800 is considered very good. Above 800 is considered excellent.
If you have excellent credit score then you can easily get approved for loans with higher amount and possibly lower interest rate than most people. This is good because if you are trying to buy a property and you can’t pay it in cash such as a car or house and lot then you will need to take a loan. If your credit score is excellent then you might be able to negotiate for a lower interest rate which makes your interest payment lower hence saving you money.
To increase your credit score, you need to have a history of borrowing and paying your debt on time. One way to increase your credit score is to use credit card for your purchases and pay a good portion of it or the full balance before the due date. If you borrowed money from banks or credit card companies and don’t pay it on time or you’re paying less than the minimum then you are impacting your score negatively.
Having low interest on your loans can be very useful especially if you know how to invest. For example, if you can borrow money for 3% interest rate and you can put that into a guaranteed income that will earn 5% or more then you can profit from money that you didn’t work for or own. Just be extremely careful when doing this and make sure you have a guaranteed return of more than the interest you will pay. You don’t want to be losing money in investment and then having to pay the loan and its interest, that’s a double loss. So be very careful when taking and leveraging loans and make sure that you are managing your risk properly.