It might seem like budgeting and your credit have nothing in common, but they do. In fact budgeting and smart money management is a key factor in having good credit. Here is why:
A Give And Take Relationship
Credit is tricky business and even the smallest mistake can take a devastating toll on your credit standing. While debt is important for creating and maintaining a good credit score, too much debt can be detrimental. People who overspend or carry high credit card balances have a lot of credit debt, which means they are at more of risk for defaulting if financial hardship strikes.
Budgeting is essential for saving money, and saving money is essential for having back up funds in the event of an emergency. People rarely keep track of their savings, let alone prioritize it. Having an active savings account that is part of your monthly budget of expenses increases your chances of successfully saving money. If you were to lose your job or have unexpected expenses, a savings account can prevent you from missing a debt payment; thereby preventing credit damage.
Your credit is your responsibility, so taking care of it takes effort. Be sure you are budgeting, saving and keeping your debt-to-limit ratio low to make the most of your credit score.