Blake Fortune works in the financial industry as Partner and Chief Compliance Officer at Hamilton Capital Partners. In the following article, M. Blake Fortune II of Atlanta discusses the importance of credit scores, and how to improve financial health.
Credit scores affect a person’s ability to buy a new home or vehicle, qualify for loans, and more. What do people need to know about credit scores and financial health?
A credit score is a reflection of a person’s financial health at a given point in time, but it can also have an impact on their future. Credit scores are not stagnant and can be improved by making loan payments on time, optimizing credit utilization, and more. A good credit score allows an individual to qualify for lower interest rates, easily get approved for loans, and increase the amount of credit they have access to.
Below, M. Blake Fortune II of Atlanta explores the intricacies of credit scores, how to improve them, and what the benefits are of doing so.
Blake Fortune on the Relation of Credit Scores to Financial Health
The relationship between credit scores and financial health goes two ways. Most importantly, a credit score is a reflection of a person’s ability to manage their debt responsibly.
Blake Fortune says that a high credit score will indicate that a person is living within their means, is not overusing their credit, and has a fairly long history. A poor credit score is an indication that someone’s financial health is not as good; they may be using more credit than they should be, unable to afford monthly payments, or they may be new to having credit.
Although a credit score is really just a snapshot in time of someone’s financial standing, it can have an impact on their future as well. People with low credit scores will have a harder time acquiring new credit, finding a place to live, and in some cases, even getting hired for a new job.
Unfortunately, these hardships that result from a low credit score will only contribute to the continuation of financial stress in the future.
How to Improve a Credit Score
Blake Fortune says luckily, there are a number of ways that an individual can improve their credit score and better their financial health.
• Make Payments on Time
Payment history is the most significant portion of an individual’s credit score: 35 percent to be exact. Making payments on time for a credit card, car loan, student loan, mortgage, or any other type of credit is the best way to improve a credit score.
• Optimize Credit Utilization
M. Blake Fortune II of Atlanta Credit says that utilization accounts for 30% of a credit score, making it one of the more impactful factors that is in your control. Credit utilization refers to the percentage of credit that is revolving on a monthly basis, or how much debt is carried over month to month.
For a good credit score, it should be below 30%, and for a great score, it should be in the single digits. Keep in mind that using 0% of available credit can also harm the score.
• Manage Multiple Types of Credit
Blake Fortune explains that the diversity of credit accounts held by an individual is responsible for 10% of the total credit score. For the highest rating in this area, both revolving credit accounts (credit cards and lines of credit) and installment credit accounts (car loans, student loans, etc.) should be open.
• Don’t Close Credit Accounts
M. Blake Fortune II of Atlanta says that 15 percent of an individual’s credit score is related to the length of the credit accounts. For this reason, it is best to keep credit accounts open even if they aren’t being used. A longer history will translate to a higher credit score.
• Minimize Applications for New Credit Types
Although it is a good idea to open credit accounts when they are needed, frequent applications can harm a person’s credit score. It is a red flag for credit lenders, and this factor accounts for 10% of the overall credit score.
Benefits of a High Credit Score
The benefits of a high credit score cannot be understated or undervalued. When an individual works to achieve and maintain a high credit score, their credit score will work for them too. A person with a high credit score will:
- Qualify for lower interest rates on mortgages, credit cards, lines of credit, insurance, and more
- Have a better chance of being approved for loans
- Be more likely to be approved for home rentals or purchases
- Set up new utilities without a deposit
- Look more favorable to potential employers
Final Thoughts
M. Blake Fortune II of Atlanta notes that it is overwhelmingly clear that a high credit score is an invaluable financial benefit in many areas of life. With the multiple avenues available for elevating a credit score, every individual will be able to improve their financial health and maintain it.
