7 Hidden Benefits of a Good Credit Score
- December 16, 2020
- by Ashley
If you have a credit card or other debt, and make regular on-time payments, you probably have a good credit score. Having a good or excellent credit score is important for several reasons. Not only will a good credit score give you bragging rights in some circles, but you’ll also be able to save money over the life of your loans and get tons of other perks.
Want to learn more about how the benefits of a good credit score can change your life for the better? Here are seven ways that your credit score impacts you.
Discounts on Car Insurance
Having a good credit score can help you get better rates on your car insurance. While an insurer can’t turn you away for having bad credit, they can raise their rates. Therefore, having good credit will help you keep your premium payments low and save money on owning a car.
Did you know that having a good credit score can improve your chances of getting hired? Some employers require background checks before hiring, and some will even look at a candidate’s credit history. Although they’ll have to ask permission first, it helps a company know they are hiring the best people. If you have a bankruptcy or other red flag on your record, it could signal to a company that you are not responsible and, therefore, not a good fit for the company.
Better Interest Rates on Loans
When borrowing money, the first thing that a bank or lender will look at is your credit score. A good credit score indicates to the lender that you are likely to repay your loan in full and on time. Therefore, if you have a good credit score, the lender is taking on less risk by letting you borrow money, and you will receive a lower interest rate on your loan. Applicants with bad credit will be riskier borrowers and have higher interest rates, thus paying far more over the life of the loan.
Get the Best Credit Card Benefits
Not only can having a good credit score get you a better interest rate on a credit card, but it can also help you qualify for better credit cards as well. Some credit cards have better cash back rewards, travel benefits, 0% APR, and other incentives. To qualify, people must have a good or excellent credit score. The higher your credit score, the higher your chances are of qualifying for a credit card with excellent benefits.
Additionally, people with high credit scores can get approved for credit cards with higher limits. Low credit scores indicate to credit card companies that a person is a risky borrower. Therefore, they will impose low spending limits on people with low credit scores. Credit cardholders with good credit scores will have access to higher funds because the bank feels confident that those people will repay their debts.
Easier to Rent a Home
When you rent a home, you typically must put down a security deposit upfront. This deposit can be as little as a couple of hundred dollars or as much as the first and last month’s rent. When a person or company evaluates their renters, they typically do a credit check. If you have a low credit score, they may require a higher security deposit from you to help cover their bases if you do not pay a month of rent.
Easier to Buy a Home
When purchasing a home, a higher credit score will help you maneuver the mortgage process with ease. Lenders want to work with responsible borrowers, so people with higher credit scores see a higher rate of approval for mortgage applications.
Earn Negotiating Power
When negotiating a large loan such as a mortgage or auto loan, you will have more leverage if you have a higher credit score. For example, you might negotiate a better interest rate, which will save you a lot of money over time. You might also be able to negotiate for better repayment plans or receive a larger loan.
The Bottom Line
Having a good credit score impacts your life in many positive ways. Your credit score shows lenders, landlords, and more that you are responsible with money and can be trusted to make on-time payments. Because a credit score is a proven track record of financial responsibility, it gives you the power to negotiate better interest rates and other terms when needed. Therefore, it is wise always to maintain a good credit score and continue to use your lines of credit wisely.
For more reading, here are some tips on improving your credit and a comparison of debit cards vs credit cards and how they affect your credit rating.