What are the 7 Important Benefits of Having a Good Credit Score?
A good credit score is more than just a number on a paper. It is an open door to many opportunities, from better job positions, to lowest rates on credit cards and insurances. The higher your score, the better.
An excellent credit score is 800. But if your credit score is not close to that number, you should know what constitutes a credit score that will allow you to qualify for a loan at a decent interest rate. The answer: it must be at least in the middle to high of 600.
FICO score is the credit rating used by most consumer lenders, so it is the one that gets more attention. Credit scores are calculated based on the length of credit history, new credit, credit mix, amounts owed, and payment history.
Credit Scores differ between credit bureaus. However, Experian, one of the main three, set the ranges like this:
- More than 800: Exceptional. Probably only 1% of debtors in this range will be late in their payments. You will be easily approved for the lowest rates.
- 740-799: Very good. Probably 2% of debtors in this category will be late in their payments. You could get better rates from the lenders, but it is not guaranteed.
- 670-739: Good. 8% could fall behind in their payments. This range is where most Americans are. You are an “acceptable” risk.
- 580-669: Regular. An estimated 27% in this group could become delinquent. You are a candidate for high-risk loans at higher rates.
- 579 and below: Poor. FICO does not trust this group at all. It is estimated that 61% could fall behind in their payments. If you can get credit, you will probably have to deposit a guarantee or a deposit. You may also have to pay a fee that debtors with higher scores do not pay.
But how exactly does a good credit score impact and benefit your life? Here are the benefits:
More Possibilities of Renting Wherever You Want
It might not always be the case but more often than not landlords use credit scores to screen tenants. An outstanding balance or previous eviction will give you a bad credit score and will greatly reduce your chances of getting into the place you want. Having a good credit score will save you time trying to find a landlord willing to accept tenants with damaged credit.
You Can Make Better Deals with Your Suppliers
It’s always beneficial to show your credit history, which reflects how much and how fast you have paid your loans and debts in the past. You can also get better terms when negotiating your cable and Internet rates. By showing a good credit score, you can avoid late payment charges or even reduce or eliminate security deposits.
Better Conditions and Lower Interest Rates in Loans and Credit Cards
Buying a house while having a good credit score makes the whole process infinitely easier. It puts you in an excellent position to make an offer because your credit score will reduce your interest rate and down payment in most cases. But on the other hand, if you have a bad credit score, you will have to make a much higher down payment and pay more in interest. Therefore, your credit score definitely has a significant impact on your living expenses.
As a business owner, your credit score will determine everything that refers to your possible business loan. Not only if you are approved or not, but also the loan amount, interest rates and other factors.
Better Car Insurance Rates
A good credit score also helps you when negotiating your car insurance rates. Insurance companies use credit scores to predict the likelihood of making a claim or having an accident because they say that people with bad scores tend to file more claims. Car insurers also use them to determine how much you will pay for your car insurance. To calculate your insurance rates, they will look into the length of your credit history, the number of accounts in good standing, payment history, billing accounts and recent credit applications.
Looking Better When Applying for a Job
Although it doesn’t always occur, sometimes recruiters verify credit scores to get a better idea of the potential employees. It can help determine if there are chances of you committing robbery or fraud, find any evidence of mishandling of your finances, or judge your responsibility in general terms. We all know that a credit score doesn’t really say much about the character or personality of an individual, but it doesn’t hurt having one.
Getting a Cell Phone Contract without a Security Deposit
Some cell phone service providers may not give you a contract if you have bad credit, which forces you to choose a pay-as-you-go plan that can be more expensive, especially if you own a business and are always on the phone. Those with a good credit score do not have to pay a security deposit and can get good discounts on the latest models.
Getting Utilities without a Security Deposit
Some electricity companies and water providers require paying an initial deposit of up to $200. It is a major inconvenience if you are moving, and even if you are not changing your home or your business location, you may want to change your utility plan for other reasons. A good credit score means that you simply won’t have to pay a security deposit when getting a utility service in your name or transfer service somewhere else.
If your score is not yet high, you should exercise good lending behavior and take some strategic steps to avoid problems in the future. But most importantly, make your credit card and loan payments on time. 35% of the FICO score is based on your payment history.
You can do all of this by yourself or hire a company that specializes in credit repair to do it for you. Also, you may consider subscribing to one or both of the new credit enhancement programs, Experian Boost and Ultra FICO of Fair Isaac Corporation. Boost, which launched in March, includes utility payments in the calculation of the score, while Ultra FICO reviews bank history.