9 important reasons to think about building your creditworthiness
The world as we know it runs on credit—so much so that the vast majority of Filipinos will incur certain types of “good debt” at some point in their lives. For example, buying a home, starting a business, and pursuing higher education would be out of reach for many if hard cash was the only means to accomplish these. The ability to obtain good quality credit at any time provides a realistic way to pursue one’s dreams and guarantees peace of mind in case of unexpected events.
When we graduate and join the workforce, building credit is probably the last thing on most of our minds. However, while a challenging endeavor, improving your creditworthiness early on will definitely have a positive effect on your future.
Start with something as simple as a credit card application for a top program, like that of the Landers Cashback Everywhere Credit Card by Maya. This card is very easy to apply for, as much of the application process takes place via app. With your straightforward application for a card like the Landers Cashback Everywhere Credit Card by Maya, you can make your way towards actively building your creditworthiness and making good on great financial opportunities—which would not be available to you if you stuck with cash alone.
Here’s what you can expect after just a few years of using credit responsibly:
1) Easier access to business capital
Many individuals dream of one day running their own business. However, starting even a modest microenterprise will often require many years of saving up and inevitably require tens of thousands of pesos of unexpected expenses. Building strong personal credit early on will help you get approvals for the loans and lines of credit you need to take your business wherever you need it to go.
2) Better terms for home loans
For many of us, owning a home and the land it sits on is, perhaps, the strongest indicator that we’ve “made it.” But the reality of the Philippine economy can make this modest aspiration very challenging to do with just cash, especially early in one’s career.
Simple credit-building practices like using a credit card and paying off the statements on time each month will eventually earn you favorable repayment terms should you take out a mortgage to buy a home. With better terms, you’ll free up your cash flow and have a better chance at finally owning a property.
3) Faster rent and lease approvals
But what if you’re not interested in buying a home? In this era of remote work and digital connectivity, there are strong arguments to be made in favor of renting rather than buying. Creditworthiness, however, will still come into play regardless of where you stand on home ownership.
These days, more residential landlords and leasing agents than ever are checking credit scores to evaluate whether you’re a reliable tenant. If you’re planning to rent out a space for a business, then your credit history is most likely going to be checked, particularly if the property is in a desirable location.
4) Easy-to-pay vehicle loans
Even as on-demand car and van rentals gain popularity, having your own vehicle is often an unavoidable necessity in the Philippines, especially if you have a business. Having good credit will make it much easier to get an easy-to-pay car loan, which means that you’re no longer restricted to sketchy secondhand options. Rather, you can own a car that’s fit for your purpose, safe, and enjoyable to drive.
5) More high-quality job opportunities
It’s becoming more common for employers to consider creditworthiness as part of their background check process, particularly in positions where one is expected to handle cash and expensive assets. This is especially common in the finance sector, where one’s personal credit rating may be considered an indication of how smart one is at handling money.
6) More affordable insurance premiums
Today’s insurers are factoring in credit information to assess client risks. A more positive credit history should help ease your insurer’s concerns, allowing you to get better insurance premiums as well as more generous repayment terms. With the cost of insurance increasing year after year, anything that brings down your monthly insurance payments is going to be welcome.
7) Leverage in negotiations
Most of the creditworthiness benefits mentioned so far have to do with your ability to score good deals in everything from insurance to business loans. While these perks are fairly common knowledge, it should also be pointed out that businesses are not necessarily entitled to give you a good deal.
But good credit gives you a much stronger negotiating position than you would have otherwise. You just might be surprised at how much leeway banks and financial institutions will give you if you have a strong credit score.
8) Greater purchasing power
Building creditworthiness means that you can enjoy a higher standard of living on your current income without seriously impacting your finances. Even standard credit best practices like paying your credit card on time will eventually grant you access to higher credit limits and more opportunities for high-quality personal and business loans.
9) Long-term financial stability
Good credit ratings give you access to cash during emergencies, affording you breathing room and lessening the resulting financial impacts. Maintaining good credit also encourages responsible financial habits, helping you avoid critical financial missteps. Together, these benefits lay the foundation for financial security and wealth-building.
Start strong, stay strong
Developing a respectable level of creditworthiness doesn’t have to be difficult. Doing certain things like paying your credit card and utility bills on time will soon make you a good risk in the eyes of potential creditors. If you start early, you should begin seeing the benefits of responsible credit use within just a few years.