Do you even know your credit score right now? Your credit score can impact more than you think. Ever looked at your credit score and wondered what these numbers mean, let alone what they do?
Having a low credit score isn’t only bad news to banks. It can hinder you in a lot of ways. So why is a good credit score important? Here are some of the many ways having a good credit score can help you have a good life or at least one with fewer expenses.
1. Lower Interest Rates
Whether you want a credit card or a home loan, interest rates can kill you in the process. But having a good credit score can almost guarantee you more options. The credit score shows banks and businesses that you’re reliable and will pay things off on time, so you are more likely to get lower rates and better deals because of that past good behavior reflected in your score.
2. Better Housing Approval
Everyone has applied for an apartment that mentions the need for a credit score check. Sometimes they will even say on the application what the lowest score is allowed for someone to live there. While a credit score shouldn’t determine if you can find housing, it does. And a low score can significantly lower your chances of getting approved for an apartment or a house.
While you can find landlords who will be allowed no or damaged credit, they are few and far between. It’s much faster and easier if you already have a good score in place.
3. Better Loan & Card Approval
One of the more obvious benefits of having a good credit score is that you have a much better chance of being approved for another credit card or a loan. This could mean the difference between being able to buy a house, go back to school, or not do any of those things.
When applying for a card, places will look at other aspects of your life as well like your income and previous debt. But your chances are much better with a better score.
4. The Sky’s the Limit
Ever been trying to do something like buy an airplane ticket or rent a car with your credit card but the limit was a bit too low? If you have a higher credit score, you have a higher chance of landing higher limits on your card.
This isn’t permission to go on a spending spree, but it can help in a pinch. And having higher limits can also help you build more credit in the future.
5. Power in Numbers
If you’re trying to negotiate your interest rates with a bank for a card or loan, which many people don’t realize you can do, you will have better backing with a better credit score. A bad credit score can be used against you as a sign you are unreliable and that the lender needs higher rates to protect themselves.
If you have one of the better credit scores you can typically win lower rates in the process.
6. Car Insurance Rates
While you might assume building your credit has nothing to do with your driving record, your credit can impact your car insurance rates. An insurance company creates an insurance risk score for each customer, which determines how much they charge. Having a bad credit score can put you in that category of being an insurance risk and land you with higher premiums.
7. No Deposit, No Problem
When you move, you may need a large amount of money upfront for all of the deposits you put down, including on utilities. However, some companies will look at a good credit score and waive the need for a utility deposit entirely.
This may also ve the case with cellphone companies. Having a contract with a company is sometimes determined by your credit score. Until you prove to the company that they can trust you to regularly make payments, you might have a pay-as-you-go plan, which will cost you more than having a contract would.
What Is Good Credit?
Now that you see all the ways having a bad credit score can hinder you, do you know if you have good credit? Credit is measured on a scale of zero to 850. The FICO credit scoring system puts any number below 580 as a bad score. You need 670 or above to be good, and 740 or above to be very good.
Your credit score is built from several measures including payment history and card utilization. Your score tends to fluctuate, even if you make all your payments, but if you keep paying off your cards and loans each month, your score will increase and you will build credit.
Why is a Good Credit Score Important?
The list above should provide you with enough reasons to now answer why is a good credit score important. It can change more in your life than you may have assumed, from your card approval to your rental approval. And while a bad credit score may feel impossible to change, fixing a credit score is completely doable.
Don’t panic if you have a low score but instead make a plan of action. Get started on paying things off and make a budget so you can cut over-spending to save more. You can even talk with financial specialists or do a program like this one to receive strategies to help you when building credit.