You might not realize it but it is not only the health and wellness aspect in life which needs to be diagnosed to see if it is in proper order. We also need to check our financial health. This is done so you won’t be experiencing problems later. It also helps you to be ready to confront issues and concerns, whether it is a minor or major problem. Many people do not know that we can diagnose your financial health. What is financial health? It is just simply your ability to solve financial problems without resorting to instant loans like cash advances. Financial planning is a great thing to enhance your financial life and overall financial health. Financial health primarily requires a proper planning and a purpose.
4 Things to Check for Financial Health
- Checking your financial health is not limited to balancing your check book or monitoring your monthly pay slip. It is not even about paying your debts and seeing to it that you have extra money on hand to pay for any eventualities. Here are the ways to check if your financial position is in good condition:
- Check your investment. Let us presume that many of your investments are for the long term. However, you need to determine if you can easily convert it to cash as soon as possible. If so, by how much? Also, you need to check your investments and see if you can sell some to prevent huge losses if some of your stocks are affected by current economic conditions.
- Check your credit availability. What are your sources of credit if you encounter emergencies? Indeed, it is quite ironic that sources of credit are one of the indicators of financial health. Financial management teach us that in some cases, it is more financially rewarding to take out a loan instead of divesting assets to generate cash.
- Check your savings. The amount of money you save must mean something. For example, can your rely on it for daily expenses and other expenditures if you no longer have a job. There are situations when interest on savings are low that it is pointless to save.
- Check your credit score. Finally analysis of your credit score is a big and significant part of financial health check. This is one of the utmost priorities because having a good credit rating makes you a reliable borrower and your credit opportunities is wide. The chances of being rejected with loan application also becomes low.
Understanding your credit score
Your credit score is one of the most critical factors in determining your financial health. It stateswhether you will be given a loan if you have applied for. A credit score is a number that has arithmetical calculations which is developed by (FICO) the Fair Isaac Corporation that lenders use to rate probable customers in determining the likelihood that a customer will pay their bills on time. A credit score or credit rating is determined by using five main criteria as defined by MyFico.com: your payment history which accounts for 35% of your credit score, the amounts owed which accounts for 30% of your credit score, the length of your credit history which accounts for 15% of your credit score, new credit which accounts for 10% of your credit score, and the types of credit used which accounts for 10% of your credit score.
How does payment history affect the analysing session of credit score?
Payment data reveals the past of how you met your charges either on account or late but sadly does not determine if your money were paid prior the date which was sanctioned. Expenses owed displays the total amount of credit you have accessible. If your balance is near the credit limit this may lower your credit score. The length of history indicates how long you have had credit. If your credit history is 2 years or less could lower your credit score. New credit indicates how many times you have applied for new credit. If you open too many new accounts in a short period this may lower your credit score. The types of credit used indicate the types of accounts you have such as revolving or instalment accounts. Revolving accounts are usually credit cards and instalment accounts are usually mortgages, auto loans, etc.
What you need to know about the credit score
It is a fact that more the credit score the lower the interest rate you will receive for a loan or line of credit. Having a good credit score can save you thousands of dollars in interest over the life of the loan or line of credit. A good credit score is frequently in the area of 650-750 but may differ from lender to lender. To understand all these it is advisable to read through articles and reports that will enlighten you that how important the financial sector is for your growth.
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