Building credit is the journey up a financial mountain. It requires planning and patience. No matter how far and fast you want to get to the top, it will be done one step at a time. This is why the length of your credit history is a critical factor in determining your credit score. Lenders value borrowers who have financial experience moving up the mountain.
Yet not everyone will be able to reach an 850 credit score. So it is fair to ask why you should work to continue to build or rebuild your credit score.
Benefit One – Financial Flexibility
The higher your credit score, the more likely you are to be able to get credit when you need it. That credit will be available at a significantly lower rate. Many people think of credit in the form of credit cards, but for the major borrowing choices such as a home or starting a business, the availability and interest rates are critical issues for the borrower. If you allow your credit score to remain at an average level when the time comes to make a major purchase you are likely to find your options limited, or possibly completely unavailable.
Think of it as going to the grocery store and finding there are 10 products available. They all which vary in quality. The best will usually cost more. The number of choices available to you will be determined by how much money you have available to spend. Financial products work the same way. Depending on whether you have good credit or bad credit your options can be greater or fewer. The best products will offer you the most money at the lower interest rate.
If you have determined that the top credit score of 850 is practically out of your reach, then set a number for the height of your financial Mount Everest and work to attain it. The same planning and effort for people who have the top scores are the same for you. The key is to be realistic and plan for your future with the greatest financial flexibility as possible.
Benefit Two – Early Retirement
Your credit score and life insurance have at least two things in common. They are often ignored until they are really needed and it is essential to start building their foundations early in life. When given the choice, most people would prefer to retire early and make working an option, not a necessity. A consistent increase in your credit score over time will have you ready to get all the benefits of a higher credit score before you retire.
All the essentials of retirement – a home that has its mortgage paid off, an array of investment income, personal freedom – are best completed before the actual day of your retirement. To accomplish this goal you will need to demonstrate continuing growth in your credit history. The sooner you are prepared to financially retire, the more enjoyable your life will be.
Not everyone will have the same FICO score goal. What everyone should have is a defined goal and a plan that is designed to build their credit score over time.