Establishing good credit is one of the first, fundamental steps towards acquiring wealth and achieving financial stability. It is important to be familiar with the concept of a credit score, which is a rating that shows our degree of risk in paying off a loan. Together with other information, such as our age and salary, our credit score helps creditors understand if we are a suitable person to lend money to, whether it be in the form of a mortgage, credit card, or anything else. It goes without saying that a good credit score saves us thousands of euros in the long run, because as our credit score increases, the interest rates on our loan decrease.
It is therefore essential that we increase our credit score, firstly by ensuring that we pay any credit card fees regularly, because skipping or delaying even one payment immediately makes us less trustworthy.
Regarding credit cards, we can also simply call our bank and ask for the fees to be lowered, or negotiate for a lower annual percentage rate (APR). It may seem strange to simply call the bank and ask, but it doesn’t hurt to try. Banks compete fiercely with each other to keep their customers, so we should try to highlight the fact that we have been a customer of theirs for some time, and do not want to change, but that we could be persuaded if other banks offered us more advantageous terms. In this case, being a customer of the same bank for many years becomes a good instrument for stability.
Optimising our credit cards is crucial, because they are a very useful financial instrument. Not only do they help us keep track of our spending more easily than cash but in addition, depending on the type of card and bank, they can offer numerous other benefits. For example, some cards offer extended warranties on certain products purchased with the card, or a cash back or points programme to win trips and other gifts. When it comes to credit cards, we have to play offence, using them responsibly and getting as many benefits from them as possible. If we have to choose a new credit card, we should carefully weigh up the benefits it offers us, but also the possible fees involved. We can have as many credit cards as we like but, for most people, two or three credit cards are enough to manage their finances effectively.
Before we can save or invest our money, our priority must be to pay off any debt we may have as soon as possible. When reviewing our financial situation, we need to try to allocate even just an extra 20 euros per month to paying off any outstanding amounts due. It’s only a few euros, but it can make a difference in the long run, especially when we take into account the interest rates.