Credit scores play an important part in our financial futures. A great score could help you get flexible loan terms, better insurance, and mortgage rates that could save you thousands. Read on for a complete overview of all the benefits of having a great credit score.
It’s Cheaper to Borrow Money When You Qualify for Lower Interest Rates
Lenders use your credit score to price loans based on the probability of you repaying your debts on time. By having a good credit score, you qualify for lower interest rates, enabling you to save money and pay off your debts faster. Lowering your interest rate by 1% could save you approximately $72,000 on a 30 year, $300,000 mortgage.
More Lenders Will Approve You for Credit Cards and Loans
Another benefit of having a good credit score is that you can unlock just about any form of financing from lenders. If you want to borrow money to plan a holiday, buy a new house, start a business, and more, you’ll have access to loans at the lowest interest rates. Lenders still assess other metrics like your debt-to-income ratio, and loan approvals aren’t guaranteed, but having a high credit score significantly increases your chances of approval. You can feel confident that when you apply, there is a high likelihood of getting approved.
You Get Higher Limits
By demonstrating your capacity and willingness to repay on time, banks and other lenders are more than willing to let you borrow more money. Higher limits on credit cards will lower your utilization rate and increase your credit score in the process.
You Get More Bargaining Power with Creditors
Banks and lenders are constantly competing against each other to attract the best borrowers, so another benefit of having an excellent credit score will qualify you for the best interest rates if you’re interested in refinancing your loans. You end up with a lot more bargaining power with creditors and the ability to negotiate lower rates on your accounts. Lenders may be unwilling to negotiate if your credit history isn’t so great.
You Get Better Car and Homeowners Insurance Rates
Another benefit of having an excellent credit score is saving money on car and homeowners insurance. While most states allow credit-based insurance scoring, insurance companies are not allowed to penalize you for a bad score by increasing your premiums, denying coverage, or canceling your policy. On the other hand, many companies report that a credit-based insurance scoring system helps lower premiums for about half of customers because it is considered a fair assessment of a driver’s risk. One example is Nationwide. A few states have banned this strategy altogether, such as Hawaii, Maryland, Massachusetts, and California.
You Get Better Cell Phone Contracts with More Options
Forget about those pay-as-you-go plans and purchasing expensive phones because if you have a good credit score, you’ll qualify for a contract without having to pay a security deposit and may even receive a discounted purchase price on your new phone. If you have a bad credit score, service providers may still give you a contract, but they’ll require a deposit, and you may not receive a discount on the purchase price of the new phone.
You Can Get a Nice Apartment or House
It’s no secret that landlords check your credit score. Why? They need to know if you have the capacity and willingness to repay on time. Having a bad credit score may exclude you from living in nice apartments and homes. According to data from Experian, one of the big three credit bureaus, a minimum score of 620 is often required to qualify for renting an apartment. At the same time, other landlords may be stricter and require a minimum of 700. You may not need to bring on a co-signer or pay a considerable security deposit to secure your apartment by having an excellent credit score.
You Qualify for Great Credit Card Perks and Benefits
A higher credit score enables you to take advantage of the best introductory offers and incentives on new credit cards, such as 4% cashback on dining, 3% on grocery stores, and many other benefits. Specialty cards offer unique perks and benefits to draw you in, and if you are good at managing your money, racking up those points and rewards is a no-brainer!
Save Money on Your Utility Deposits
If you live in an area susceptible to natural disasters, having a good credit score could save money by not having to pay a security deposit when you establish new utility services in your name or transfer it to another location. These utility deposits are around $100 – $200 but can still be a massive inconvenience.
Developing a Good Reputation That Could Help Your Career
Having a bad credit score could prevent you from getting a job in specific industries, like financial services. Companies are looking for reliable and trustworthy individuals, so they tend to run background checks that include credit checks. While they still need to access permission to do so, and you could legally deny the rights to check your credit file, not allowing them to check your credit could prevent you from getting hired.
You Get Access to More Industries
If you plan on starting a business one day or want to work in a highly regulated industry, having a good credit score could set you on the right path. Lenders will be more willing to allow you to borrow money to set up your business, and employers would be more likely to take a chance on you if your background and credit check come up clear.