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A high credit rating does more than make you feel good about your finances. It significantly impacts your capacity to buy things and borrow money when the need arises. By checking your credit report, you’ll know whether you have a good standing or a bad rating.

What is Considered a High Credit Score?

A credit report contains all the information about your bill payments, loans, outstanding debts, and credit card usage. Instances of being sued, arrested, or bankrupted are also listed in the report.

Credit reporting agencies (CRAs) are responsible for tracking and maintaining your credit record. Financial institutions can request your record from these CRAs to help them decide in approving loan and credit applications.

In the U.S., the FICO scoring model is used by the largest CRAs which include Equifax, Experian, and TransUnion. The score is broken down into factors that impact your financial capability.

FICO credit score components
Fig. 1. FICO credit score components
(Source: Wikipedia)

FICO scores range from 300 to 850, with the higher number reflecting a better rating.

  • Poor: score under 630
  • Average: 631 to 690
  • Good: 691 to 720
  • Excellent: 721 and above

Each CRA might not provide the same scores, but your rating will most likely fall under the same category. You may receive a score of 700 from one agency and a 712 from another, but both still fall under the ‘Good’ credit quality rating.

Benefits of a High Credit Score

Attaining and maintaining a high credit score comes with advantages exclusive to the status.

1. Receive better financial deals

Do you see commercials saying 0% interest rate on credit card purchases? How about loans with very low interest rates? They’re meant to entice more customers, but they’re often offered only to those with impressive credit scores.

Average FICO score in the U.S.
Fig. 2. Average FICO score in the U.S.
(Source: Experian)

A high credit score qualifies you to receive lower interest rates, better rewards, and bigger cashback features. These perks encourage you to use your credit card more, which translates to more opportunities to further improve your credit score. As long as you clear the balance before the due date, you’ll continue boosting your credit rating.

A high credit rating also gives you negotiating power in lowering fees and rates. Since you have a good financial reputation, you can bargain with your lender to give you better deals on the next loan applications.

2. Find it easier to rent a space

Landlords may look at your credit score to assess your capability to pay rent on time. The more expensive the space is, the higher the credit score requirement will be.

If you have a high credit score, you’ll find it quicker to land an apartment or lease office space. The landlord may even ask for a lower security deposit and give you more leeway on payment deadlines.

3. Increase your credit limit

Banks are always more than willing to increase the credit limit of cardholders who have a high credit score. Since you’ve demonstrated your capability to pay back on time, creditors also become more open to other facilities like overdrafts.

4. Enjoy better insurance rates

Insurance companies also look at your credit score to assess the premium they’ll require.

A bad credit score can signify frequent claims and poor lifestyle choices. You’ll usually get higher insurance premiums and probably limitations in coverage. On the contrary, a high credit rating will get you a lower premium for the same insurance product.

5. Get better loan deals

Loan approval is based on factors like your income stream, job stability, spending habits, and debts. A good credit score tells lenders that you’re very responsible in handling your finances and there’s a lower risk that you’ll default on debts.

Effect of credit score on interest rates
Fig. 3. Effect of credit score on interest rates
(Source: Better Money Habits)

Your credit score also affects the interest rate imposed on loans. A high credit score will almost always qualify you for the lowest interest rates and waive additional charges on loan repayments. With a lower interest piling on the balance, you’ll be able to repay the loan faster, ultimately saving you money in the long run.

Lenders favor clients who have high credit scores. It doesn’t guarantee you’ll get loans approved, but you’ll have a better chance compared to when you have a low rating. This gives you the confidence that you can easily borrow money for emergencies if needed.

6. Avoid security deposits

Moving into a new house entails expenses in securing the connection to necessary utilities. Electric, water, and gas retailers may ask you for a deposit of at least a hundred dollars if they see that you have a bad credit rating, since they’ll believe you have a higher chance of missing out on due dates.

On the other hand, a good credit rating will guarantee instant connection and faster transfer of the service under your name. Most probably, utility providers won’t ask for a security deposit since they know you have a reputation of paying bills on time.

The same thing goes when applying for a cellphone contract. Having a bad credit score will get you nothing except the lack of option to avail a phone contract. You’ll be left with pay-as-you-go plans that go with a separate phone purchase, which can be a costly and cumbersome option to manage.

However, if you have a high credit rating, you’ll be able to secure a phone plan with the best deal available. You’ll also get access to the latest phone models without having to buy them separately.

7. Land a job faster

Some companies may look at the history of your purchases and bills payment to determine employability. They attribute financial responsibility with good work ethics, believing you can commit to tasks and finish them in time, the same way you keep track of bills payment. All these mean you’re more likely to get hired if you have a good credit score.

If you’re someone who often borrows money, spends up to the limit of the credit card, or pays bills past their due dates, employers might see you as a reckless and irresponsible person with erratic behavior. No one wants to be on board with a negligent employee who has a high risk of jeopardizing business projects.

Conclusion

An outstanding credit score certainly has its perks, but to get that kind of status, you’ll have to carefully plan your finances right from the start. A single mistake can take you two steps back or even tarnish your record and make it even harder to get a good score.

It’s not the end of the world if you find yourself having a bad credit score. Credit repair firms like Repair Credit 101 can help restore your record by clearing inaccurate credit marks and disputing incorrect information that may have dragged down your score.

It pays to have a good credit standing as it has a significant impact on the financial options available to you. With an excellent credit score, you get to enjoy better loan deals, lower interest rates, and more flexibility in your debt repayments.

If you have a troubling score and you want to improve it to good standing, then Repair Credit 101 can help recover your rating. Our affordable credit repair services guarantee you’ll receive positive results within 90 days of working with us.

Interested in what we can do to your credit score? Drop us a message on our website and we’ll get in touch with you.

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