When it comes to credit scores and what affects them, people have heard a lot. Some myths and lies have misled people in many ways. If you are not careful, you could end up lowering the score even when there is an opportunity to raise the figure. The worst part is that your credit score can come between you and financial aid. But when the score of either an individual or a business remains consistently high, many benefits will follow.
One of the concerns that many people have is what factors affect credit scores. One such factor is the savings that you make. If you ask any entrepreneur, you will realize how this deep this concern is.
But this article seeks to clarify various issues around this, making it a very informative piece that you may not want to miss.
What Are Savings and Where Do They Come From?
Many people put aside some money for future emergencies or to buy a certain item that they have wanted for a long time. Saving money is done in many ways, but what matters is how consistently you do it. However, saving is one of the hardest things to do according to financial experts. First of all, those who save seriously put aside this money before they spend any on other things. But if you approach it from the other side, you will hardly have enough to use and save.
The best ways to save include the following;
- Savings account at a bank – All banks offer a savings accounts. Some are locked to specific amounts for a specific period while others are left open. The beauty of using this method is that the money earns interest as per agreed rates. So the more you save, the more you will get from the bank.
- Putting money in a safe – Let’s not lie here. There are many people who save money every month and keep it in their house. Although it is not recommended due to the many risks involved, it still works, especially for those who are disciplined enough.
- Buying an asset – You can save using assets that appreciate or retain their value. However, a person should be cautious and avoid assets that depreciate or have many uncertainties like vehicles or businesses. As of now, land is the best asset to use when you want to save.
Savings and Credit Score Ratings
After looking at what savings are in a depth, it is now time to learn how they are related to credit ratings. We all know that financial reports that go to your file affect your score. So, the first question to ask ourselves is whether your saving report goes to the credit score file or not.
The simple answer to this question is no, it does not.
The other concern is whether or not savings affect your credit score. According to experts from different financial fields, how you save will affect your credit score indirectly and in many ways. That is why it is good to know how credit boosting works since it entails a lot of things.
Using Your Savings to Boost Your Credit Score
Saving is done for many purposes as mentioned earlier. But it is still recommended to save without designating the money for anything. Thus, you will have money to sort out any financial crisis that may come up. One of them may be boosting your credit rating, especially when you are planning on looking for financial help for a business or anything else. The savings will work in the following ways:
Paying off your credit balances – Many people use credit cards these days. They bring the convenience of spending before you can earn. Thus, it becomes a loan. The user will then pay off the money at the end of the month with some interest. However, issues may arise when there is no money to pay off your credit card balance. If you lose a job or any other source of income, you can use the savings to cover this and keep your credit rating high or even improve it.
Paying loans – The same case applies in this situation. Your savings could help in a hard financial situation since the lender will not understand. The people who are affected by this are not the employees, but businesspeople whose income fluctuates up and down. Once again, your savings will come in handy.
Buying a credit line – If you are interested in boosting your credit score quickly, it is time to buy a tradeline for yourself or your business. Luckily, there are many people and companies willing to sell you this. But first all, it should be available in your region to make sense. Make sure that the person or company tradeline that adds you has the best credit score to pull yours up quickly.
Paying any pending bills – Although people think that paying bills on time is not important for credit scores, this is crucial and it will boost the credit score even with a small margin. The companies that service your bills may not forward a good report about your account, but they may forward the message when you do not pay on time. Your savings should be used when there is no other source of funds to clear the bills. You will have a lot of problems to deal with if this is not done.
The above information is clear: savings play a role in boosting someone’s credit score. If you thought that they did not, now you know. The myths surrounding these issues are no longer going to affect you in any way.
However, you can agree that it is an indirect boost. Even without any savings, no credit bureau is going to alter your report negatively as long as you are paying the bills and loans and doing other things that directly affect it. But it is better to take advantage of your savings in the above ways.