Your credit score is a powerful financial health indicator, but chasing a good score without keeping your bigger financial and debt plan in mind, can lead you to make poor money decisions.
The world of credit can be tricky. There are people who tell you that loans are evil and the worst thing you can do is to get into debt. Others say that without taking on debt you cannot build a credit record and that without a credit record you cannot get access to good debt – the kind that makes it possible to buy a home of your own or pay for tertiary education.
There is truth in both these points of view, and it is up to you to decide how you will deal with debt.
Most of us need debt (a loan) for life’s big purchases, such as a car or a house or a good education. Sometimes we also need a loan to deal with emergencies, such as medical treatment or unplanned home repairs.
To get these loans, especially at a good interest rate, you need a credit record that proves you are willing and able to repay the loan. Usually, credit providers look at your credit score to tell them whether or not you are likely to be a good customer.
It is, therefore, important to build a strong credit score of 680 and higher. However, a credit score is not the only important factor and you should be careful to not focus so much on building your score that you neglect other healthy financial habits.
Financial health depends on a variety of factors, of which your credit score is only one. Knowing how to improve your credit score is extremely valuable, but it is not the only thing you need to know to achieve financial health.