A healthy savings account is your best defense against life’s curve balls. But sometimes setting aside some money every paycheck isn’t enough. Especially when you’re just starting out in life. In addition to a savings account, a credit score safety net can provide the security you need in a financial emergency. A good credit score can provide you access to low-interest credit options that can help cover any expenses your emergency savings can’t. But how do you acquire a good safety net? Here are a few options:
Credit Cards. In an emergency, your credit cards’ available credit lines can serve as a secondary emergency fund. Thus, they become a credit safety net. Using your available credit card balances can help you with avoiding depleting your saving’s account. Keeping a decent chunk of your spending limit available will not only offer you a good lifeline but can also boost your credit score. Plus, a good credit score can earn you the best rates.
Personal Loans. When you need quick, extra cash, a personal loan, might be good choice. They are good for moderate-sized projects and qualified borrowers don’t need collateral. A good credit score gives you the opportunity to quickly get this type of loan. Plus, if you pay it back on time every month it’ll continue to help build your credit.
Home Equity Loan. If you own your own home and have available equity (meaning you owe less than your home is worth) you can take out a home equity loan. This is a one-time lump sum loan, usually of a sizable amount. This can be good for big projects, like remodels, additions, building a shop, or paying off your other higher-rate debt.
Home Equity Line of Credit. These are much like a home-equity loan, except instead of taking out one big lump sum, you can use the line of credit like a credit card. You can make purchases, pay the balance down each month, and then make new purchases. This is great for regular projects or sizable emergencies. Right now, the credit union has an introductory rate of 1.99% annual percentage rate for the first 6 months.
By using your available credit options, making payments on time, and paying things off, you are continuing to build your credit score which in turn, gives you a safety net to be able to borrow future money.
Did you know?
We have a free online Financial Wellness Center with interactive learning modules and calculators to help you master your finances.