Setting and achieving financial goals is a significant part of adulthood. Financial goals provide you with the motivation to save money, manage your budget wisely, and make smarter financial decisions. But even though the recent COVID-19 pandemic has raised awareness about having your money matters in order for the future, statistics have shown that most people still aren’t confident about their current spending habits.
A survey from TIAA revealed that 78% of respondents ages 18 and up are struggling with financial wellness. Many have less than six months’ worth of expenses in savings, and even more have some form of debt or outstanding credit on their account.
This leads people to become stressed and overwhelmed, and even vulnerable in cases of emergencies. On the flip side, those with healthy financial goals are likelier to achieve a better quality of life.
Challenges to Achieving Your Financial Goals
In America, four in seven citizens can be categorized as financially literate, and only 24% of millennials understand basic financial concepts. Likewise, the global cost of living continues to rise year after year, worsening the crisis at hand.
In truth, there are a lot of things you can do to improve your financial situation. It starts with knowing what information to look for, where to find it, and how to use it – one of the most important ones being credit scores.
Learning About Important Financial Topics: Credit Score
Your credit score is a topic that may seem daunting at first. But it’s quite simple: a credit score is a number that is designed to reflect the creditworthiness of a person.
It can be used by lenders and credit card companies to assess how likely it is that someone will pay back a loan. Therefore, maintaining a good credit score allows you to get better loans and lower interest rates because it shows that you are financially responsible.
What Exactly Makes a Credit Score Good?
Credit scores can range from 300 to 850 – a score above 700 is good, and a score above 800 is considered excellent. However, creditors may also set their own standards when evaluating customers.
That’s why it’s important to know what’s the difference between a hard and soft credit check, because both methods are frequently used to determine your creditworthiness, alongside scoring models developed by FICO and VantageScore.
Hard vs. Soft Credit Checks
Hard checks are performed when you apply for new credit. They require your consent because they can drop around five points from your report – an effect that lasts up to two years. This is so financial institutions can see when and where else you’ve applied for credit in the past.
Soft checks, on the other hand, occur when an individual or company checks your credit as part of a background check, and don’t affect one’s credit score.
How Can You Improve or Fix a Low Credit Score?
Having a low score or failing a credit check can prevent you from achieving certain financial goals, and acquiring needs in life such as an apartment, auto loan, or insurance.
To get back on track, you can get rid of outstanding balances, pay bills on time, and keeping your utilization ratio below 30%. You can also look into getting a secured credit card if you’re someone who struggles to keep their spending at a minimum.
Leveraging Your Credit Score Knowledge to Achieve Financial Goals
Moving forward, it’s important to keep in mind that improving your credit score is one of the crucial steps to achieving your financial goals for the future.
Although it’s seemingly hard to achieve, there are many ways to improve your score if you’re willing to commit to it. In the end, a good credit score essentially means more financial freedom, better financial literacy, and more power to make wiser financial decisions that will benefit you more.
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