It’s common knowledge that you should maintain a good credit score. But for what reason? Isn’t the score only there for bragging rights and to say to creditors that you know how to manage your expenses?
Aside from uplifting your ego for having an enviable rating, there are other reasons why it’s vital to keep your score up there. Here are the benefits of a good credit score you can enjoy.
1. It’ll be easier to apply for credit
Having a high credit score isn’t just for show. It’s there to help creditors decide whether to approve or reject your credit application.
Your score reflects how responsible you are in handling personal finances, assuring creditors that they’ll have no problem lending you money. You’re more likely to get approved if you have an excellent credit score.
2. Get an increase in your credit limit
Your credit limit is determined by your income and credit score. Banks only give higher credit limits to people who have proven they’re always up-to-date with their financial obligations.
A higher credit limit lowers your credit utilization ratio. It indicates that you keep expenses in check by not maxing out your credit card.
A high credit limit allows you to get bigger loans and make bigger purchases. But that doesn’t mean you have the license to spend more than you can handle. Your credit limit should be used just like an ID saying you can manage bigger expenses, but you prefer not to.
3. You enjoy lower interest rates
Aside from having your credit application approved, one of the most important benefits of a good credit score is obtaining lower interest rates.
Many people underestimate the savings that can be obtained from having lower rates.
For instance, a $10,000 loan with a 5-year repayment term and a 20% APR will cost you an additional $5,900 just for the interest alone! That’s more than 50% of what you originally borrowed.
However, if you have an excellent credit rating, you can receive the same offer but with only 10% APR. Recomputing the same loan amount, you’ll be paying only $2,750 in interest at the end of the term. You save almost half the money you would have spent if you didn’t have a good credit history.
The average interest rate on credit cards in the US is 17.25%. Rates are likely to fall further due to the latest rate cut from the Federal Reserve but don’t expect anything drastic.
Since you’re graded as a low-risk debtor, you’re more likely to receive lower interest rates on your loans and credit cards. The deal gets even better if you have a ‘prime’ or ‘super-prime’ rating (or equivalent) which are the highest tiers in Experian’s system.
The benefits of a good credit score aren’t limited to credit card products. You can even refinance your home or car loans with your high credit score to get better interest rates.
Many people believe they’re not entitled to get lower interest rates because of their mediocre scores. Sadly, the same people fail to regularly check their credit information, so they have no basis to believe they have a poor score.
If you have a high enough credit score, negotiate with your lender to reduce existing rates so that you can repay future debts faster.
4. You get access to premium rewards
Premium credit cards are mostly given to those with excellent credit scores. These cards come with perks like travel credits, travel insurance, medical assistance, and access to exclusive airport lounges, to name a few.
Creditors don’t usually give these kinds of rewards to normal clients. Typically, loyal customers with large accounts or those who have a great credit score are given these perks. So, with your good credit score you can also access exclusive luxuries and perks. And remember, you don’t have to be rich to have a great credit score. You just need to maintain a good credit history.
5. You’ll secure leases and cell phone service more easily
Even if you’re not applying a loan, you can still take advantage of a great credit score when getting an apartment.
Landlords may run a credit check before accepting your rent application.
You may still have a chance to get the place, but your landlord may require a higher security deposit than usual. They may even ask for a cosigner to ensure the rent is paid on time.
On the other hand, you’re more likely to be approved if you have an excellent credit record. An outstanding rating is word itself that you’ll be a responsible tenant. It can even give you more legroom for delayed payments in case emergencies arise.
Being able to choose a place to stay is also one of the benefits of a good credit score. More options also mean better chances of getting the best deal in town.
Aside from rental leases, you can also get better cell phone service deals just by having a great credit score.
Having a low credit rating will result in a larger down payment or inaccessibility to the latest models offered by the provider. Like landlords, they’ll look at your credit score to make sure you can pay phone bills on time.
6. You’ll get lower premiums on insurance policies
No other industry loves to assess risk more than the insurance business. This is one of the areas where you can take advantage of having a good credit score.
Insurers factor in your credit history in calculating premiums. A strong credit history is indicative of your unlikeliness to make a claim, which of course, is the preferred type of client by insurance companies.
Your application won’t be rejected by any insurer, though, even if you have a poor credit history. The catch is that you’ll pay higher premiums and probably face more unfavorable terms and conditions for making a claim.
If you already have an existing insurance policy in place, you can still enjoy the benefits of a good credit score by shopping around for a better deal. Contact your current issuer and other insurance companies to discuss if they can offer a better deal with your impressive credit history.
Keeping a Good Credit Score
The things discussed here are only a few of the numerous advantages of having a good credit score. There’s no downside to improving your credit rating. Not only will you profit from the lower rates, easier loan applications, and better negotiating power, but you’ll also benefit from the discipline and skill you’ll learn in handling finances.
But sometimes, things might not go your way. Although you’re keeping your expenses and credit use in check, you’re not seeing any improvement in your credit score. Worse, you might observe that it’s even getting lower.
It’s possible that there are errors in your credit report. These mistakes are not entirely your fault, but you still have to address these issues to fix your credit score.
This is where Repair Credit 101 can help. You can leave the work of resolving the inaccuracies with us and just focus on keeping your finances healthy. Our proven methodology in repairing credit reports will guarantee you results within 90 days, or we’ll give your money back.
Do you feel like you’ve become a victim of credit report errors? Just drop us a message or give us a call and we’ll handle the issue for you.