8 Benefits of a Good Credit Score and How It Can Help You
If you want to know how monetarily stable and creditworthy you are, look no further than your credit rating. Since one’s credit rating is an integral part of one’s monetary identity, it’s essential to start building a solid foundation as soon as possible.
A bad credit rating doesn’t mean you can’t make it, but it will be difficult and expensive. Having a high credit rating will simplify your monetary life by allowing you to save money and obtain loans at preferential rates. Here are some excellent benefits of having a high credit rating that should encourage you to keep it.
1. Increased Loan and Credit Card Approval Chances
Your credit rating and credit history will almost always be checked by a potential creditor before they approve your request for a loan, credit card, or line of credit.
Most people with poor credit histories don’t even try to apply for a new loan or credit card since they’ve been rejected several times.
On the other hand, a high credit rating indicates that you are a responsible debtor who will continue to pay their bills on time and repay their debts as agreed.
Although a high credit rating is helpful, it is not necessary for approval because creditors also look at things like income and debt. The likelihood of being granted new credit, however, is improved by a stellar credit rating. Meaning you can apply for a loan or credit card without worrying about your monetary standing.
2. Lower Interest Rates
One of the expenses associated with borrowing money is the interest rate, and this rate is often determined by how good or bad your credit is. If you have a high credit rating, you have a greater chance of being authorized for the cheapest interest rate that is being given, which will save you money over the course of the life of the loan or the balance on your credit card.
Individuals with stellar credit ratings are offered the lowest interest rates, while those with poor scores pay much more.
Consumers can expect to see an interest rate range for the majority of monetary products. Since a higher credit rating makes you a more desirable debtor this will allow you to get a cheaper rate of interest offered on your loan or credit card request. Spending less on interest means more money for debt repayment and less for interest.
3. Rental Property Approval is Easier and Faster
An excellent credit rating is important regardless of whether or not you ever intend to purchase a home. Many potential tenants don’t know this, but landlords take a potential tenant’s credit rating into account when making a decision.
Most landlords will check a prospective tenant’s credit and conduct a background check. Unpaid bills, high levels of debt, or irresponsible account management in recent years may cause a creditor to reject your request in favor of someone with better credit.
A landlord is more inclined to approve a tenant with a stellar credit rating because tenants with a history of on-time payments are more desirable than those with a history of delinquencies. If you don’t have a stellar credit rating, you may be required to pay a larger security deposit, settle for a shorter lease, or be completely shut out of the housing market.
When you’re ready to rent a new place, having excellent credit will be a key factor in determining whether or not you’re approved.
4. You Can Get Bigger Loans and Higher Credit Card Limits.
Both your income and credit rating plays a role in determining how much money you can borrow. If you have a stellar credit rating, creditors will be more likely to extend credit because they know they will be repaid on time. With a low credit rating, you may still qualify for a loan, but the amount you can borrow will be lower.
If you have a high credit rating, you will be able to qualify for larger loans, such as the jumbo loans required to get a mortgage in some expensive areas. Credit card companies might offer you a higher limit if they think you deserve it.
5. Better Rewards and Perks
A higher credit rating opens up more options when it comes to credit cards, and not just in terms of available credit limits.
No doubt you have seen commercials for credit card rewards programs, sign-up bonuses, introductory APR periods, and cash-back rebates. These are the kinds of self-sustaining monetary services and products that you should be looking into.
In order to qualify for the best rewards cards, you need to have excellent credit. Both cash-back and travel rewards cards exist, with the latter offering a percentage of your purchases as compensation.
6. Lower Rates on Car Insurance
When you apply for a new policy, many insurance providers will also look at your credit report. You may add auto insurance companies to the list of places that might turn you down if they see your credit rating isn’t high enough.
Those with lower insurance risk ratings are deemed to be a bigger monetary risk, and as a result, they may be charged higher premiums. Insurance risk ratings are generated using details from your credit record in addition to your insurance history.
You can expect to pay less for insurance if you have a stellar credit rating compared to similarly situated applicants whose credit ratings are lower.
Curious as to how your credit rating relates to your driving skills? If an applicant has a history of credit problems, their insurers may worry that they will be reckless behind the wheel. On the other hand, an applicant with a good credit history who always pays their bills on time and stays on top of their other commitments may be more likely to drive safely and responsibly.
7. Negotiating Power
When you have a high credit rating, creditors are more likely to give you favorable terms, and you may even be able to choose which ones they give you.
If you have a high credit rating, you can use that to your advantage when applying for a loan or credit card. Take advantage of the other tempting offers your good credit has earned you from other businesses if you feel you need additional negotiating leverage.
However, if your credit rating is low, your loan terms will likely not be negotiable, and you will be limited in the credit options available to you. Your dealership may be forced to take whatever loan they can get, regardless of how terrible the terms may be.
A high credit rating can help you in more ways than one when negotiating a mortgage rate. For this, you should get prequalified with several different creditors and compare interest rates. The next step is to shop around with your estimated rate in hand to see if you can negotiate better terms from various creditors, such as a cheaper interest rate or no origination fees.
8. Higher Job Opportunities
Some employers use credit checks as part of the screening process when applicants are interested in joining their team. Although it is possible to land a job with even less credit, issues such as delayed payment and bankruptcies may raise red flags for potential employers.
They may be hesitant to put you in a role where you have access to company funds if they learn you have a history of personal monetary mismanagement. A debt-ridden worker may be seen as a liability or weak link, especially if the position requires access to confidential information or trade secrets.
Before you go out and look for a job, it’s smart to see what’s in your credit reports. If you review your reports, you might find some inaccuracies or missing details.
What Is a Good Credit Score?
There is no universally accepted credit rating range because it is dependent on the source and the criteria used to determine a score. Furthermore, since there are various scoring agencies, it is possible to have multiple credit ratings.
According to one credit scoring agency (FICO®), a good score is anywhere from 670 to 739. Another credit scoring service, VantageScore®, uses a scale from 661 to 780 as a good credit range. Scores may also be classified as very good, excellent as well as exceptional.
How Can You Improve Your Credit Score?
With this newfound knowledge, you might decide to work on boosting your credit rating. Taking the following actions could have a positive impact on your credit rating:
- Make regular inquiries into your credit reports
- Have a basic understanding of what goes into calculating a credit rating
- Evaluate your credit records regularly for inaccuracies
- Find out how often you’re allowed to view your credit record
- Learn the most common errors that people make when using their credit cards
- Settle your bills on time and try to keep your balances as low as possible
- Be wary of solutions that promise to raise your credit rating overnight
Bottom Line
Different people have different concepts of what constitutes a stellar credit rating. However, in most cases, a credit rating of 670 or higher indicates stellar credit.
It is crucial to build and sustain a stellar credit rating, as this factor is used in the vast majority of lending rulings. A high credit rating can open up doors to favorable lending conditions, cheaper interest rates, and other advantages. Your odds of being accepted for jobs, apartments, and more will improve as a result.
If you discover that you have a low credit rating, you should make the effort to raise it as soon as possible so that you will be prepared to submit requests for loans or housing rentals in the near future.
