In our world of online financial transactions, it’s increasingly important to maintain a good credit score. Not having an acceptable score can leave you financially vulnerable. It heavily influences your ability to borrow money. You might also find it difficult to gain access to financial products such as loans or credit cards.
If your current credit score isn’t up to snuff, you risk losing access to several benefits, some of which are listed below. It might take some focused effort on your part, but boosting your credit score can make many aspects of modern life more pleasant. Simply put, a better credit rating can help you lead a more rewarding life.
Leading credit bureau Experian recently released a report highlighting a significant improvement in credit scores of consumers across all generations. In light of the pandemic’s dramatic impact on the U.S. economy, this is some much-needed good news. If you aren’t yet in that category, that’s OK. But the following list of benefits will provide the motivation for making changes to the way you manage money.
1. Lower down payments.
Creditors spend their lives assessing consumer spending habits. They have to decide whether any particular consumer represents “a safe bet.” Before they grant anyone access to a line of credit, they want to be certain of a return on their investment.
For major purchases, such as a vehicle or a home, lenders prefer to see lower-rated clientele “put more skin in the game.” This might mean, for example, that a customer they perceive as high risk might be asked to put 20% down. Lower-risk clients might be asked to put up 5% or nothing at all. This reality all by itself makes it worthwhile for consumers with low credit scores to use a credit builder card as a means for improving their rating over time.
2. Greater flexibility to decide where you’d like to live.
Maintaining a minimum credit score is extremely helpful if you hope to qualify for a decent apartment. A score of 620 is considered fair credit under the FICO (580–669) and VantageScore (601–660) systems.
Some property management services and landlords are very particular about their tenants having a 700+ credit score. If you don’t have one, they are likely to stop your application process in its tracks. They can always rent to someone else.
If your credit score is 700 or higher, you’re more likely to sail through the rental application process. It will also help you avoid the hassle of finding a cosigner or putting up a large security deposit. Some landlords will demand a deposit of a few months’ rent to reduce the risk of nonpayment by tenants with poor credit.
3. Better rates on insurance.
You can save a good amount of money on car and homeowners insurance simply by having a good credit score. Credit-based insurance scoring is a common practice in many states. Insurance companies take a surprisingly close look at consumer money-handling abilities and use this information to assess their risk.
Why? Because this type of analysis results in a highly accurate assessment of your likeliness to submit a claim. Many companies report that this process actually lowers premiums for more than 50% of customers.
4. Lower interest rates on loans.
You may need to apply for a loan to remodel your home or garage, buy a car, or start a business. If your credit is poor enough, you may be denied outright. If you do qualify for a loan, you may end up paying handsomely for the privilege.
A good credit score often qualifies you for loans with a lower interest rate and more flexible terms. If you’re applying for a mortgage, you might save more than 1%. This can result in substantial savings if the mortgage amount and terms are significant.
5. Access to rewards and perks.
The best rewards from credit cards are reserved for customers with a good credit score. Many financial institutions throw in plenty of attractive perks as well. If you have a good credit score, you can expect exclusive invitations to special offers and events. You might get access to free music services, discounts on online streaming, reduced pricing for premium products and services, and so on.
Your impressive credit score will get you higher-tier cards that can in turn help you snag the best seats for movies and other events. You’ll be able to dine out or enjoy entertainment at the best places and save money while doing so. You can also receive cash bonuses and cashback offers on select purchases.
6. An enhanced reputation.
Having a solid credit score means you don’t have to go looking for great offers. They’ll come to you via lenders and bankers. A high credit score automatically reflects your repayment capacity and can come in mighty handy whenever you decide to borrow. You won’t have to put in nearly as much effort to get a personal loan or refinance other debts. It’ll be that much easier to upgrade to a better credit card with higher limits.
In addition to these perks, a good credit score can also help you get a good job. Some states allow employers to pull review a person’s credit history to make hiring and promotion decisions. Your permission enables employers to see your credit reports, mortgage payment situation, missed payments, outstanding debts, and past foreclosures. Not giving your permission can silently communicate a negative message to your potential employer.
7. Lower utility bills.
Utility services run a credit check on consumers whenever they apply for a connection. These routine checks enable utility providers to see whether the consumer is reliable and makes timely payments.
A low credit score means you may have to pay a higher security deposit in addition to the first few months of service. The same holds for water meter connections. These connections can be thought of as loans. If you don’t pay your utility bills on time, it will adversely affect your credit score.
There’s only one surefire way to improve your credit score.
There’s one simple way of building credit and improving your score — pay your bills on time or (even better) slightly ahead of the deadline. When you build up a history of making timely payments, you can steadily improve your score with every month that goes by.
Bring all of your past-due accounts up to date. Hold off on as much optional spending as possible until the companies that track your payment history are all taken care of.
Like it or not, your credit score shows up in a lot of places.
The strength and sustainability of your credit score impact nearly every aspect of your financial life. Even the essentials — such as leasing a new apartment or applying for a loan or a mortgage — will be affected.
Not sure how to get out from underneath a poor credit score? You might seek professional advice from credit counseling agencies. Fixing your score may take anywhere from three to six months of good payment habits. Only then can you hope for a visible change in your credit score. The less damaging information on your report, the easier and faster you can build a good credit score.