Good-Credit Benefits

You can survive with bad credit, but establishing a good credit score is neither easy nor cheap. A good credit score, typically defined as a FICO score of at least 670 or a VantageScore of at least 661, can help you save money and simplify your financial life.

Advantages of a Good Credit Score

It’s important to remember that a good credit score can vary depending on the scoring company and the source of the score. Different scoring companies provide different credit scores based on your credit reports. For example, FICO® considers scores between 670 and 739 as good, while VantageScore® might consider scores between 661 and 780 as good. Scores can also be classified as very good, excellent, or exceptional.

Having a higher credit score indicates healthy credit and can lead to various benefits such as:

1. Getting Better Rates on Car Insurance

Some insurance companies may use your credit scores to make decisions when you apply for coverage, and they might also check your credit to determine premiums or renewal eligibility.

2. Saving on Other Types of Insurance

Companies providing other types of insurance, like home insurance, also examine your credit history to assess your payment history and debt levels, which can impact the premiums you pay. Understanding how your credit score can influence various aspects of your financial life, from insurance rates to loan approvals, is essential.

3. Qualify for Lower Credit Card Interest

When you apply for a credit card, the card issuer will likely check your credit. If you’re approved, a good credit score may make you eligible for benefits such as a lower annual percentage rate (APR).

What is an APR? The Consumer Financial Protection Bureau (CFPB) describes it as the cost you pay for borrowing money. For credit cards, interest rates are typically expressed as a yearly rate known as the annual percentage rate (APR). The CFPB also states that having good credit may help you secure a lower APR, as credit card companies often offer their best rates to customers with the highest credit scores.

Good credit may also play a role when you want to upgrade or apply for a new credit card with better benefits and rewards.

4. Get Approved for Higher Credit Limits

You have just discovered how having good credit can help you qualify for lower interest rates on credit cards and potentially secure a higher credit limit. Additionally, maintaining good credit may increase your chances of being approved for larger loans from financial institutions. Lenders are more likely to offer you more favorable terms if you have a good credit score, as it indicates that you are a trustworthy borrower.

5. Have More Housing Options

The area you live in can greatly affect your quality of life, right? Having good credit can also be beneficial in this scenario. This is because landlords may review your credit history when you apply to rent an apartment.

Good credit may also improve your chances of securing a mortgage for a house and getting a lower interest rate. According to the CFPB, “The better your credit history, the more likely you are to receive a good interest rate on your mortgage loan.”

6. Get Utility Services More Easily

It’s important to keep in mind that your credit history can impact your ability to establish utility accounts for services like electricity or internet. According to the Federal Trade Commission, “Obtaining utility services is closely tied to your credit history. A strong credit history makes it easier to access these services.” Additionally, having good credit could mean that the utility company won’t ask for a security deposit.

7. Get a Cell Phone Without Prepaying or Making a Security Deposit

If you have poor credit, some cell phone companies may require a security deposit or ask you to prepay when opening your account. However, good credit may help you avoid those up-front costs.

8. Look Better to Potential Employers

When you apply for a job, some companies may look at your credit reports as part of a background check. While getting a job with less-than-perfect credit is possible, employers might see things like late payments and bankruptcies as possible red flags.

9. Improve Your Chances of Renting a Home

Similar to a potential lender, a landlord may want to review your credit history. Your credit and payment history can help the landlord determine how likely you are to pay your rent on time. If your credit report shows a lot of negative marks, it may be challenging to secure your desired apartment. Even if you are able to rent with poor credit, the landlord may require a higher security deposit or ask for a co-signer on the lease.

10. More Negotiating Power

If you don’t already have the best interest rates, a good credit score will give you leverage to negotiate lower rates on credit cards or new loans. Having a higher credit score means you will have more offers and providers to choose from, giving you more bargaining power. On the other hand, if you have a low credit score, creditors are unlikely to change the loan terms, and you won’t have other credit offers or options available.