Have you checked your credit score? Don’t panic and feel discouraged if your credit score isn’t as favourable! Instead of looking for a quick fix, why don’t you consider something that can improve your credit score over time, like, setting a realistic budget? A budget refers to an estimated amount of money dedicated for a set period of time.
But how exactly can the act of setting a budget help improve your credit score and ease your process of taking up a quick cash loan? Wonder no more, read on for three ways a budget can help your credit score.
1. Enables you to make repayments on time
Paying your bills and loan repayments punctually, and in full, is one of the most determining factors in influencing the rating of your credit score. Even if you have a poor credit score rating, there’s still hope for it to improve. But what does a budget have to do with making repayments on time?
Well, when you establish a fixed amount to spend each month, you’re providing yourself with the discipline to spend within your financial capabilities based on different categories. Then, you can have peace of mind since you know that you’ll still have enough money for other necessities on top of settling your bills and repayments.
2. Allows you to keep track of your expenditure
For those who don’t make their loan repayments on time, it’s probably because they forgot, or don’t have enough money for it due to overspending – among other reasons. Without a budget, you won’t even realise how much you’re spending in comparison to your monthly income. Essentially, a budget is a tangible way for you to compare your intended spending to your actual spending.
Throughout the month, add up your spending and compare it to the estimated amount you have set. You’d be surprised by how the small purchases add up to a large sum! As such, by tracking your spending, you’re giving yourself a financial boundary which can deter overspending.
3. Differentiates your “needs” and “wants”
Window shopping is harmless until you spot a new designer bag that’s in season. You don’t need it, but it’d make a beautiful addition to your collection. Whatever it is, it’s a natural thing to feel swayed. In this case, the line between a “need” and a “want” is blurred.
But when you’re making sure to spend only within the budget you set, you know you’ve made a promise to yourself: to only spend on what is necessary so that you can pay off your debt worry-free. Hence, it’ll help curb impulse buys that tend to burn a hole in your pocket.
Going debt free does not stop at getting a consolidation loan, because even then, you’d need to set aside some cash for your loan repayments until you’ve paid back the amount you borrowed. Setting a budget and committing to it can help you distinguish between your many priorities, and focus on where your income should go into. However, make sure to keep reviewing your budget to stay on track and remind you of any upcoming payments.
And once your debt has reduced, you might see an improvement in your credit score! So, the next time you want to apply for an instant loan in Singapore, your credit score won’t be a barrier that’ll stop you from doing so.