One of the most ‘adulting’ milestones in life for young adults is getting a credit card. Though it may be overwhelming for some, it is an important way to show responsibility toward money management. And this is an important step in building your credit scores. But what is a credit score in the first place and why is it important?
For those who aren’t that familiar with the term, a credit score is quantitative figure given by creditors to consumer detailing out the level of likelihood that consumer will pay back their debt and how much risk there is for lenders.
Usually, credit scores are based on active accounts, debt levels, payment history, purchase frequencies, and the like. Such numerical figures are given so lenders can assess whether or not you can pay your fees and loans on time.
What some people don’t realize is the strong financial benefits that come with having good credit. By having a strong credit score, you are entitled to multiple incentives that can help you make more money in the long run. That’s why it’s essential to take credit scores seriously and to start building yours early on.
In the next paragraphs, you’ll learn about the benefits a strong credit score and how it can help you make money.
Benefits Of Making Money Through A Strong Credit Score
If you have a credit card account, there are multiple ways for you to maximize it to the best of its potential for your own benefit. Through credit scores, you don’t just receive benefits in the form of credits, but you can actually make money too! If you’re curious and interested in how, well, we got some pretty easy tips for you!
1) Maximizing Personal Loans
If you have strong credit scores, you can make money through maximizing personal loans. How? If you have a good credit score and you’re offered cheap rates to personal loans, take it!
This is because investing money at cheaper rights can give you a chance for high returns in the future. One specific example is a HELOC or Home Equity Line of Credit, which is usually at a 4% rate. Imagine getting a strong rates at 4% and then using that money to buy a business making 20-40% returns. This is what firms like MadX Capital help individuals do when they find online businesses for them to purchase.
2) Vehicle-Based Businesses
Ever thought of being an Uber, Grab, or Lyft driver? Many drivers will get themselves car loans with low payments due to a strong credit score (whether as a lease, financed or a car loan, all of which require a credit check). They then either become drivers themselves or simply rent their cars out to other folks that become drivers for these services.
This isn’t limited to cars. You can also purchase a tractor trailer with a strong credit score and then become a long-haul driver. These individuals can make 6-figure incomes.
3) Explore Online Selling
Ever wondered how some people have the capital to buy and sell products online? In a very competitive market such as online selling, many people find a way to maximize their money and make the most out of it. This is actually what some individuals do all thanks to their good credit score.
If you’re more interested in venturing down this type of money-making endeavor, you can start off by choosing a product you want to focus on. Then, using your strong personal credit, you can purchase some items to start off and then go into the whole formal process of selling it. With the right strategy, you can earn more money than your loan amount. The lower your load amount, the more money you get to keep.
4) Rental Properties
Real estate mortgage rates are heavily driven by people’s credit score. The better your credit score, the more you can borrow and the lower your interest rate is going to be. Having a strong credit score can allow you to purchase a property and find a tenant to rent it from you to cover the expenses (and borrowing amount)
The lower you can get your mortgage (which is made up of principle and interest), the more profit you can make from your tenant and the faster you can pay-off the home if you reinvest your profits. This can amount to tens of thousands of dollars in savings over the period of the mortgage.
We discussed above the opportunity of taking a loan out and then using it for real estate investing. Before this we discussed using borrowed money to purchase a business that can provide a higher return. Well, any investment can work in the same way
Banks and trading platforms will offer clients with strong credit scores the opportunity to borrow in order to trade on the stock market, FX, bonds, bitcoin exchanges and much more. Having a good credit score tells the financial institution that you are a low risk and they can allow you to purchase on margin.
Using low interest money towards high return investments is a strategy that many wealthy individuals and businesses have used for centuries. If you know the risk and how to mitigate it, it can be a strong income creating process for you as well.
How Can I Improve My Credit Score?
Now that we’ve uncovered the benefits of having a good credit score, let’s discuss how we can improve it. In improving your credit score, one needs consistency and deliberate action in monitoring it regularly (we recommend every month). This way, you can observe how your financial behavior can impact credit. Follow these simple tips to improve your credit score:
1) Pay Twice Or More In A Billing Period
Although this is for those who can afford, paying more than once in a billing period helps improve your credit score. Yes, it’s not for everyone but if you can, it could help to pay every 2 weeks in a billing period. By doing this you decrease the amount outstanding of your credit halfway through the month, which keeps your outstanding balance low and shows consistency in payment.
2) Use Apps To Track Your Credit Score Regularly
As mentioned earlier, making a habit out of checking your credit score regularly can really go a long way. From checking it daily, you can develop a habit of checking it monthly. In doing so, you can see how you progress. If you’re having a hard time, you can always explore different websites like myscoreIQ.com so that you can be assisted in checking your score more consistently.
3) Avoid Closing Inactive Credit Card Accounts
Most creditors use the ‘age’ of your credit card accounts as a basis for giving you a certain amount of points. To a certain degree, this becomes very helpful if your creditor is one of them. A lot of creditors actually give more benefits to older credit card accounts so it would be foolish to close these first! If anything, it would be more recommended to close newer ones if you cannot handle too many accounts simultaneously.
4) Don’t ever extend yourself
Your credit score is based on how much money you owe versus how much money you have (assets vs liabilities). It also takes previous behavior into consideration (like paying late, filing for bankruptcy or not paying at all). If you don’t over extend yourself, then there should never be a reason for not being able to pay a credit bill or loan as required in the contract.
So manage your expenses wisely and live within your means.
5) Be Patient
A good credit score takes time to build. And if your credit score has a few blemishes, know that they will eventually disappear but it will take some time. It’s important during that time to be fiscally responsible and focus on improving your credit score. Don’t over use your credit, but show consistency in payment. Have enough credit cards, but not too many. Pay off debt quickly and responsibly. But you can’t rush this process.
6) Speak to a debt expert
If you’re downing in debt right now, then don’t worry about your credit score yet. Worry about getting out of the hole first. Reach out to debt consolidation expert and see if you can reduce what you owe. Cut up your credit cards (don’t close the accounts, just dont use the cards anymore). Try to consolidate all the debt to 1 place so that you can pay off as many as possible.
But get help. There are many experts out there that can put you on the right path.
Good Credit Score, Good Life
To wrap everything up, it’s really challenging to find good creditors that can benefit you in the long run. However, by making sure you have excellent credit scores, you can always turn things for your benefit in the end. Yes, credit scores can be part of the adulting life, but there are definitely ways to make it a winning process for you.
Remember that through good credit scores, you can potentially create a money-making venture through it. Whether you want to explore more on service businesses, products, or even simply through cashback promos. Just be sure to consistently track it properly and maintain it through our tips, and you’re good to go.