Up until this point, this blog has certainly covered its fair share of tips and methods of improving credit, including the what, when, and how. However, today it is going to focus more on the WHY.
More specifically, why is it important to improve your credit. In fact, there are many important reasons and motivations behind why people want to re-establish their credit, and amend their overall financial situation.
Coincidentally, many of these motivators revolve around different types of freedoms that can occur as result of having more cash flow and less debt. Let’s take a closer look at some of these credit-related autonomies.
Emotional Freedoms
Dealing with financial difficulties is a scenario that can sure cause its fair share of emotional distress. In fact, your own life as well as your personal relationships can be negatively impacted, ultimately taking its toll on your entire life.
With financial problems and high volumes of debt eating away at your personal happiness, it then makes perfect sense why so many of us would be highly motivated to start paying off our debts as soon as possible.
Ultimately, freeing up some additional income can provide us with the emotional freedoms we have been lacking, as a result of living under the weight of debt and a blemished credit situation. Once you have started to rebuild your credit, with a higher degree of financial confidence and less stress – the shift to a happier life can sooner take place.
Financial Freedoms
When we think about having cashflow and being debt-free, we also think about the term financial freedom. Of course, whenever debt and bad credit is a concern, certain financial freedoms will decrease as individuals are more likely to struggle within various financial aspects of their lives.
The unfortunate reality it that with bad credit it becomes more of an obstacle when trying to secure the loans you need. For example, if you are trying to buy a home – you may as a result find it more challenging to obtain your mortgage. On top of that, if you are able to gain mortgage approval – you are still looking at paying higher interest and perhaps less favourable loan features overall.
Alternatively, with good credit not only would this process become more straightforward, you could also secure better loan features, including a lower interest rate. As you can see, the benefit of improving your credit means better access to loans and more manageable interest rates – perhaps even saving you some more money in the long run.
Next, say you already have your mortgage, yet also have bad credit and a lot of debt. If you are then able to reduce your debts and improve your credit, here you can also experience greater financial freedom down the line, even paying off your loans at a faster rate.
The same can also be said for credit card debt. Credit card debt also acts as a strong motivator for improving your credit, as carrying around high credit card balances can lower your credit score, further limiting your financial freedoms. As a result you may also worry about maxing out these cards and not being able to manage paying them off over time.
Furthermore, if you are constantly paying off a lot of credit card debt each month, this also may means you have not able to save any money. While it is good to keep paying down debts, sometimes we don’t have the ability to save for the future.
All in all, continuing to pay down debts, including credit cards can be a first step towards alleviating your financial stress and freeing up some additional money for emergencies or future needs, such as an education or a retirement fund.
Lifestyle Freedoms
Another important aspect of our lives that bad credit can affect is our ability to be flexible with regards to certain lifestyle freedoms. Here lifestyle freedoms refer to being able to have choice in what you buy and when. If you want to buy a new car for example, without having a good credit score and financial security – these types of freedoms and choices can become compromised.
If say you want to buy a certain type of vehicle, yet you can not secure the loan size – or you simply can not afford a vehicle in that price range – then you may be forced to settle for a lesser vehicle instead of the one you really want or need.
Again, this scenario also makes a great case for being motivated to improve your credit. With a better credit situation and less overall debt, you are more likely to be able to have more choices when it comes to making certain purchases in your life. When all is said and done, if you need a larger vehicle for your lifestyle needs – you can have more freedom to do so and make the choice that is right for you, instead of having that choice taken away or made for you.
There you have it, there are many advantages of being able to start paying off your debts and raising that credit score now. Thus stemming from all of the psychological-emotional, the financial and the lifestyle-choice freedoms that can come out of improving your credit, the greater ability you will have to lead a more well-rounded, happier and healthier life – a life that is full of more possibilities than it was before.
