For most people, there will be times in life when you need to apply for credit or financing. Having a good credit rating is therefore important to progress through various stages of life. Below are some common examples of when good credit is important.
Before applying for credit or finance, it is important to assess your finances and ensure you can make your repayments.
Applying for a credit card
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A credit card is probably one of the first lines of credit many people apply for. Initially, people without any credit history might be offered credit cards with small limits to help them build a credit history.
In the future, as someone builds a good credit rating, they may be eligible for larger credit limits with more favourable interest rates.
Taking out a loan
At other times, people may need to take out a loan to facilitate a big-ticket purchase such as essential home renovations or helping towards the cost of an unexpected bill.
To be approved for a loan, a good credit rating is vital, especially when applying for a large loan amount. Additionally, a better credit rating could secure lower interest rates.
Buying a house with a mortgage
Demand for property is huge right now, meaning more people than ever will be trying to secure mortgages for their new homes.
To obtain a mortgage, a good rating and minimal or no bad debt is required. It is important for someone to get financial health in good order to buy a house, as a credit rating dispute could impact your chances of getting a mortgage or drive your interest rates up.
Car finance purchases
If you take out a Personal Contract Plan (PCP) or lease your car from a dealership, you will need to have a good credit rating to secure the financing you need.
With many cars now being leased rather than purchased, especially newer electric vehicles, this will become an increasingly common life stage for many people in the future –for which it is crucial to have good credit.
Building a good credit rating
To build a good credit history, it is important to not fall into bad financial habits.
Make sure that you pay all your bills on time and pay more than the minimum on credit card and loan repayments.
Building a good credit rating is essential for many of life’s biggest purchases, so be sure to build a rating that works for you rather than against you.
