In its simple definition, credit can be termed as a lender’s trust and confidence in a given debtor’s ability and willingness to repay the loan. Essentially, the term credit is used to indicate the amount of confidence a creditor is willing and ready to place in that particular debtor. This therefore implies that a person, who has a good reputation or credit score in that matter, usually wins more trust from the lender. The lender will not hesitate to give such a person (with an excellent credit) a loan as compared to the person with a bad or poor credit score. Hence the credit score of an individual is frequently expressed in numerical form and it is usually put in a certain range of numbers, hence the closer someone’s credit score is to the high end of that particular range, the better his/her credit score is. Over many years, credit has been a crucial component within which economic and financial sectors work. The main purpose of credit has always been to allow people, organizations and nations at large, acquire goods and services now with the promise of paying back at a later agreed time and terms (Fonteyne, W., 2010). While it appears a good idea to get goods and services on loan with the assurance of repaying it in future, it totally becomes senseless when such benefits are cut off in the event of difficulties in paying off the loan. As such, the recommended key to responsible credit use is avoiding taking more debt than you can actually be in a position to pay off. Under very rare circumstances can one claim that credits are freely available -in fact the amount payable back is often more than the borrowed man. However many borrowers do consider this additional cost worth it specifically when well-structured arrangements are effected on how to spend the loan. Benefits of having a Good Credit Score Having a good credit score is all about budgeting and management of borrowed money. It is first the need to acquire the purpose of the debt and planning how to initiate, expedite and heighten the repayment process. For some reasons, some people may survive with a bad credit score but it is always difficult and not cheap at all. Nevertheless, for those for understand the necessity to keep well their credit statuses normally enjoy a wide range of benefits that help them expand their various economic endeavors. Some of these benefits include enjoyment of low interest rates on credit cards and loans (Oh, I., Lee, J. D., Heshmati, A., & Choi, G. G. 2009). Interest rates are the costs paid for the borrowed money and usually range depending on the credit score. Interestingly, people with good credit scores enjoy the best interest rates in that they qualify to pay lower finance charges on loans and credit card balances. These kinds of interest rates are however tied to shorter time frames in the sense that, the faster one repays their loan the lesser the money they pay as interest rate and the more money they get for other expenses. In other words, this is strictly tied to time and only applicable to those with well repayment plan; otherwise the costs may even be more. Consequently, a good credit score can make the debtor or borrower stand a better chance for credit card and loan approval. In its common understanding, credit operates based on credit history of the person applying a loan. Typically, it is constantly a major problem for borrowers with a poor credit score. A borrower with a poor credit will seem reluctant to apply for a new credit card because of the fears that he/she will be turned down based on the previous scores. In any case, a person with an excellent credit score is not also guaranteed any approval for a loan as the lender has to put other factors into consideration such as his income and debt. Nevertheless, a good credit scores enhances confident in that one can apply for a loan or credit card and there will be increased chances of approval than the person with a bad credit score. Subsequently, a good credit score builds more negotiating power to the borrower. Basically, the terms of negotiating with the lender are increased on the interest rate and on the credit card or even a new loan. Debtors with good credit scores are often sent attractive offers by the concerned companies, and they can easily take advantages of such offers to substantially increase their bargaining power. It is quite a disadvantage to people with poor credit scores as they are unlikely to receive other credit offers or options, and many cases the creditors are also unlikely to budge on loan terms (Cortavarria-Checkley 2010). Getting approval for higher loan limits is another benefit of having a good credit score. At any given time, the person’s borrowing capacity is fully grounded on his income value and credit score. A very easily gained advantage one gets as a result of maintaining good credit scores is that, banks are more willing to let such an individual borrow more and more money simply because he/she has demonstrated the ability to repay on time the borrowed money. Even though a bank may go ahead and approve loan for someone with a poor credit score, the amount awarded is generally limited and may not meet the needs as intended. Yet, in a rapidly advancing world, companies and property owners are routinely checking the credit status of their clients. For instance, many landlords are now using credit scores as a way to screen tenants (Steele, M 2010). This means that one has to get approval for rental houses and apartments. Therefore, in the occasion the credit score shows a conflicting previous record, such as eviction or outstanding rental balance, the chances of securing a place in the apartments are greatly undermined. It thus becomes beneficial that one has a good credit score as this will save him on the time and annoyance of looking for a landlord for approval. Similarly, a good credit score helps one to avoid security deposits on utilities. In a 2007 US based research conducted on the effects of natural disasters on finance, it is estimated that these deposits on utilities are extremely high and sometimes range between $100 and $200 in addition to enormous inconveniences when one is relocating due to disasters (Perry, V. 2008). Events of natural disasters occur unplanned and unexpectedly such that, even if one had no plan to move soon from the affected place, he/she is forcefully required to do so. But a good credit score allows the individual to establish a utility service in his name or transfer service to another location in case of an unforeseen occasion. Ways to improve credit score Undertaking initiatives to improve credit scores is pertinent but often intimidating as it virtually entails learning and understanding of terms and concepts that one might not have been familiar with. Nonetheless, the more and ready the person is to improve his/her credit score the more the benefits ensued to him. A more helpful way of improving credit score is budgeting. Coming up with a budget is an excellent first step yet very challenging to many people. The present world has gone a bit high and come up with excellent means of budgeting through interactive tools and apps that offer guidance and help consumers in building, managing, and staying answerable to their set budgets. These platforms operate competently such that they set up customized budgets based on the consumers’ monthly requirements, and in addition send consumers automated updates, warnings, and reminders when the bills are approaching. Principally, a budget sets up limits within which consumptions are dependent on. This is a unique characteristic in many borrowers with good credit scores. They actually plan a budget which acts as a reference and reminder for all expenses to be met by the loan. Much as extra and unpredicted expenses may arise occasionally, someone with a good credit score is always at a better place of calculating effectively on how to handle the expense than one with a poor credit score (Cortavarria-Checkley 2010). Another way of improving a credit score is ensuring timely payments from time to time. This can slowly but surely outweigh the past credit lapses and will eventually increase the chances of being considered for a loan. Much as borrowers are frequently repaying their loans, available statistics indicate that most of them are doing so late than the agreed time (Steele, M 2010). Time is of great concern when it comes to loan repayments and has been a major reason why most people are reflected to have poor credit scores. Successively, an additional way to help improve credit scores is through developing an understanding of what is the credit report. This report is usually created by a credit bureau and mainly shows the credit history of the debtor. In this report, the key content is the biographical information, account information, public information, and inquiries. All these details are vital to an individual’s score and shows him the loan limits, payment history, current balances, judgments, who is been looking at his credit, among others (Perry, V. 2008). Furthermore, it is advised for one to check their credit status annually. In other cases, it would be good for one to sign up for a credit monitoring service. This will frequently provide information regarding the credit score each and every time depending on the borrower’s need. Also, in some situations where there are errors with the credit card, it becomes useful to correct errors and follow up with the creditor to ensure the error is permanently corrected. Of it all, the most important way to maintain a good credit score is coming up with a budget plan and sticking to it unceasingly. Influence of Budgeting in maintaining a good Credit Score This section provides a wider view of budgeting in relation to credit score. As already established, budgeting plays a key role in maintain a good credit score since it involves preparing a list of all expenses and comparing them against the total income. Thus a budget primarily gives an account of the inflows and outflows of everyday expenditure which may in turn help one to attain his financial goals. Budgeting is prerequisite to maintaining a good credit score as it constantly serves as a money management and monitoring tool that is tied on very specific objectives (Peñaloza, L., & Barnhart, M 2011). The major reasons people opt for loans is to meet financial requirements such household, transport, shopping, health and beauty, education and profession, family and friends, taxation, financial commitments, and even food and drinks (Li, Y., Gao, J., Enkavi, A. Z., Zaval, L., Weber, E. U., & Johnson, E. J. 2015). Without a proper budget, these needs can easily surface the loan making it hard to pay off. However, the budget planner can help in determining the incomings and outgoings and provide a breakdown for every expense in line with the available income. Budgeting includes financial statements which are used in future as expenditure references. They facilitate the understanding of the previous consumption of the loan and from the information obtained; it becomes easier for the debtor to arrange on how to use the loan. Persons with poor credit scores hardly have financial statements and they regularly experience difficulties in managing their expenses –making it hard for them to repay the loans on time, and this result to additional interest rates and reduced credit scores in terms of loan qualifications. A well formulated budget plan does not always guarantee success but it can be helpful in avoiding failure. Following the budgetary guidelines leads to identifying aims of credit needs and continually ensures effective monitoring operations and takes corrective actions for deviations from the plan. This can help debtors to monitor and control the sudden expenses that would otherwise inconvenient the process of loan repayment (Carlitz, R 2013). Conclusion The best way to gain a good credit score is to gain a clear picture of you finances. It is good to write down all the expenditures and separate the recurring ones from the non-recurring. Non-recurring expenditures such as clothing and entertainment usually vary and their need is not as much as the recurring expenditures such rents and utilities. A budget is of paramount concern in reevaluating expenses and making decisions on the given needs. Keeping all the expenses in check will maximize the amount of money you put towards the debts. In so doing, it becomes easier to build a good reputation with the creditors and they will not be hesitant to improve your credit score and performance.

Aisha Nauling