What Great Credit Can
Do For You
Maintaining a solid credit score opens a lot of doors. Not only will a high credit score help you qualify for lower interest rates and exclusive rewards programs, but it can help give you an edge in a competitive rental market, save you money on insurance premiums, help you land a job, and more.
Needless to say, building good credit should be a priority for you. If you have bad credit or limited credit history, don’t worry. It’s never too late to build or rebuild your credit score. Keep reading to learn what is considered a “good” credit score and how a great credit score can benefit you.
What Is A Good Credit Score?
Credit scores range from 300 to 850, with 714 being the average credit score in the US. Credit scores are often grouped into the following ranges:
- Poor: 300 – 579
- Fair: 580 – 669
- Good: 670 – 739
- Very Good: 740 – 799
- Excellent: 800 – 850
Your credit score is calculated based on several factors, including the age of your accounts, your payment history, and your debt to credit ratio.
Obviously, the higher your score, the better, but you don’t have to have a perfect credit score to begin reaping the rewards of good credit. If your score falls in the “good” range or higher, you’ll have access to many of the benefits that come with a good credit score, including lower interest rates, a higher chance of credit approval, and more.
Benefits Of Having A Good Credit Score
There’s no way around the fact that a positive credit rating is important. It can help you secure a job or a rental, but it will also save you money in the long run. Let’s look at some of the main benefits of a good credit score.
Lower Interest Rates
A high credit score signals to lenders that you are responsible with your money and highly likely to pay back what you owe. Because they perceive you as a low-risk investment, they’ll reward you with lower interest rates. This makes borrowing money in the form of car loans, mortgages, or any other form of personal loan much more affordable.
Easier To Get Approved For Loans
If your score is on the lower end of the credit spectrum, you might have difficulty being approved for loans or credit products because lenders may perceive you as high-risk.
However, your score isn’t the only thing lenders consider when reviewing your loan application. They will also look at your payment history, debt to income ratio, the types of accounts you have, and the length of your credit history.
The higher your credit score, the easier it will be to get approval for credit products.
If you’re new to building credit, you could have nothing but positive data on your credit report and still have a low score simply because your account is new. If this is the case, spend some time building your score before applying for a new loan– it will be easier to get approved, and you’ll secure a better interest rate.
Better Credit Card Rewards
Credit card companies typically save their best rewards programs for customers with top credit scores. These include benefits like flexible points, higher points accumulation rates, 0% interest on certain purchases, better cashback rates, discounts when you purchase from affiliated brands, and more.
Even if you can’t qualify for the most exclusive programs, a good credit score can still secure you some nice rewards, including discounted travel or cashback on certain purchases.
Better Chance Of Being Approved For Rentals
Landlords need to ensure that the tenants they rent to will be able to pay their rent on time each month. One way they can predict your ability to do this is by running a credit check. They’ll look at your credit score, your payment history, any bankruptcies on your report, and the amount of debt you carry to evaluate whether you have the means to pay the rent.
A high credit score will make it easier for your rental application to get approved, and it can also help you stand out in a competitive rental market. If you’re hoping to upgrade to a nicer apartment, make sure your score is in tip-top shape before filling out the application.
You Won’t Need Security Deposits For Utilities
Since utility companies supply the service before receiving payment, they are obligated to ensure their subscribers can pay their bills. If your credit score is on the lower end and you have negative data on your credit report, you may have to put a deposit down up-front.
Customers with a positive credit history and a healthy credit rating will not be asked to make a security deposit for utilities because utility companies perceive them as creditworthy and capable of making payments.
More Borrowing Capacity
The better your credit score, the more creditworthy you are in the eyes of lenders. You’ll have an easier time securing loans, and it will also give you access to lower interest rates and higher borrowing limits.
When you prove that you’re capable of making on-time payments, lenders are eager to loan you more money so they can earn interest off of the money you owe them.
Of course, a high credit score alone isn’t enough to secure super high lines of credit. Your annual income also factors in.
The Power To Negotiate
High interest rates mean money that could otherwise be directed to your savings or the principal balance of your debt payments is going straight into the hands of your lenders. But, when you have a strong credit score, you can renegotiate the terms of your loan.
Your high credit score signals to lenders that you’re a low-risk borrower and are highly likely to pay your loan back in full. Lenders are keen to work with customers like this, so use it to your advantage. Whether you’re applying for a car loan, buying a mattress on credit, or taking out a personal loan, you can use your solid credit history to negotiate a more favorable interest rate than the one initially offered.
Lower Insurance Premiums
Did you know that your insurance premiums are partly based on your credit score? Insurance providers use what they call an “insurance-based credit score” to determine how much your premium will cost. They use data from your credit report, including your payment history and debt to income ratio, to calculate your insurance score. So, while your insurance score may be different than your credit score, the two are closely linked. Ultimately, the higher your credit score, the more favorable your insurance rates.
Easier To Get A Cell Phone Contract
Phone companies run credit checks on customers before allowing them to open a phone plan. Since they provide a service upfront, they want to ensure they can rely on their customers to pay their bills. If your credit is too low, you may not qualify for a phone plan or finance a new device. Fortunately, many companies offer prepaid phone plans that will suffice until you can build your credit up enough to qualify for a traditional contract.
Eager To Boost Your Credit Score?
Now that you’re aware of all the different ways a good credit rating can benefit you, you’re probably keen to boost your score. Fortunately, there are many ways to improve your credit score in both the near and long term.
Lowering your debt to income ratio by paying down existing debt is a quick way to increase your score by a few points. Other options to improve your score include diversifying your credit mix, letting your accounts age, and continuing to make on-time payments to all of your existing accounts.
If you’re not sure where to begin, CreditBull can help. We have over 20 years of experience in credit and financial matters, and we specialize in helping you come out of a bad credit situation. We know how important good credit is, and we can help make your life easier by helping you build your credit.