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By: Ellie Burgueno
John Rockefeller once said, “The most important thing for a young man is to establish a credit, a reputation, and a character,” and he was certainly right! In today’s financial landscape, a good credit score is more than just a number – it’s a key that unlocks various opportunities and financial freedom. Whether you’re planning to buy a home, secure a loan, or even apply for a credit card with attractive rewards, having a solid credit score is crucial and can truly change the financial game to your benefit. It is the key to financial freedom.
I still remember when I bought my first home. It took time but felt so rewarding not to need a co-signer to proceed with the purchase. I was blessed to learn from a very young age about the importance of credit, savings, and how this could impact my entire life, and mainly, my financial stability, so I took that time to save and be very careful with my finances. Now, I’m on track to make my financial plans come to life and start investing more strategically, while I teach others to do the same.
Credit can be a powerful tool in achieving important financial goals. It allows you to make large purchases (such as a home or start a business) that, in some cases, you would not be able to afford if you were paying in cash. A good credit score is essential when your goal is to qualify for the lowest mortgage rates, snag a stellar credit card bonus, and sometimes even land your dream job. Since your credit influences so many major life decisions, it’s important to build credit early and consistently.
You can build credit in several ways, including opening a credit card, paying eligible bills on time with Experian Boost, and getting credit for monthly rent payments. Knowing the reasons why credit is so important can help motivate you to work on building a good credit score. Below, I outline a few of the major benefits of building credit, plus ways you can build a good credit score.
Why Is Building Credit Important?
Building credit may not be on your radar, but it should be. Lenders check your credit history anytime you want to open a new financial product, like a loan or credit card. They may only approve applicants who meet certain credit requirements, such as having a good or excellent credit score.
If you don’t have good credit, you may miss out on securing a low-interest rate on a mortgage, personal loan, or credit card, and wind up paying more during the term of your loan. But if you establish a good credit score, you can save money on interest payments and use the savings to invest in your future or other projects.
Credit also influences more than your ability to qualify for new financial products. Some employers may even check your credit report for potential red flags, like delinquencies or accounts that are in collections, before extending a job offer. The results of their credit inquiry may affect whether they hire you or not.
Benefits of Building Credit
Building a good credit score is beneficial for many financial and life decisions.
Having a good credit score significantly improves your chances of approval for credit products like loans and credit cards, as lenders favor higher scores. It also enables you to qualify for lower interest rates, potentially saving you hundreds or thousands of dollars on personal loans, mortgages, and credit card balances. Additionally, good credit helps you secure better terms, such as higher credit limits, larger loan amounts, and extended repayment periods. Furthermore, a high credit score unlocks premium credit card benefits, including annual credits on dining and travel, high rewards rates, and exclusive access, which are often unavailable with lower credit scores.
To effectively build credit, start by opening a secured credit card or becoming an authorized user on a family member’s credit card to establish a credit history. Ensure timely payments on all debts, as punctuality significantly impacts your credit score. Keep credit card balances low relative to the credit limit, ideally below 30%, to maintain a healthy credit utilization ratio. Diversify your credit mix by including different types of credit, such as installment loans and revolving credit. Regularly monitor your credit report for errors and dispute any inaccuracies promptly. Finally, avoid opening too many new accounts in a short period, as multiple credit inquiries can negatively affect your score.
Building credit doesn’t have to be time-consuming. You can integrate simple actions into your routine, such as setting up autopay or linking eligible bills to Experian Boost, which offer benefits both immediately and in the long run. The sooner you begin building your credit, the quicker you’ll pave your way to success and financial freedom.
I invite you to explore my book on personal finance for women, *Hey Girls, You Can Also Become Badass Money Makers*. This comprehensive guide is designed to empower you on your journey to financial independence. Available in both English and Spanish, in paperback and ebook formats, you can find it on Amazon.com. Get your copy today and take the first step toward mastering your finances: [Amazon Author Page](https://www.amazon.com/stores/author/B0CQRXWSZL).