The Advantages of Having a Good Credit Score
Too many of us have experienced bouts of credit card debt, occasional late payments and the stealing from Peter to pay Paul lifestyle. Eventually we wise up and work toward eliminating our debt because doing so not only improves our credit scores, but it also comes with some great benefits. Here are some ways a good credit score will help you save money and make your life much easier.
Car Loans
Knowing your credit score before you buy a car allows you to confidently shop for a car with a low interest rate. A good credit score empowers you to secure a low interest car loan with a rate that’s lower than the average new car loan.
Renting
A high credit score means you pay your bills on time and a low credit score means you are a risk. With a good credit score, landlords see that you are low-risk when it comes to paying your rent on time, making you preferable to other potential renters. Pulling the FICO scores yourself, rather than having a realtor or landlord pull them, saves you time and money as well.
Car Insurance
Insurance companies associate a good credit score with responsible driving and less of a risk of using auto insurance. Historically, people with bad credit have filed more claims and these people are penalized with higher insurance premiums. For this reason, drivers with good credit scores get preferred rates on car insurance.
Cell Phones
Cell phone providers require a credit check because, like landlords, they equate lower credit scores with a higher risk of not being able to pay the monthly bill. With poor credit, cell providers offer a pay-as-you-go plan instead of a contract. But with a good credit score, your monthly rate decreases dramatically, you avoid paying a security deposit and you can take advantage of hundred-dollar discounts on the latest phones that come with signing a contract.
Utility Security Deposits
When you establish utility service in your name or transfer service to another residence, a good credit score means you won’t have to pay a $100 to $200 security deposit. These deposits are a major inconvenience if you have to relocate.
Better Credit Cards and Loans
If you have shaky credit, you avoid making new credit card or loan applications because you’re scared of being turned down. While not a guarantee, you’re more likely to be approved with an excellent credit score. Good credit scores also mean you can negotiate a lower interest rate for a loan or a credit card by simply referencing your score and explaining that you’ve received offers from other companies based on your credit score. Banks are willing to lend more money to borrowers with higher credit scores because they have a history of paying back their debt on time.
Mortgage
Good credit scores go a long way towards making sure you get the best rates available for a mortgage. Lenders offer borrowers with high FICO scores (760 to 850) lower interest rates and more loan choices. Lenders place borrowers with scores of 620 or lower in the “subprime” category, and quote significantly higher interest rates on fewer varieties of loans. A 500-520 FICO score is usually the minimum range that will qualify for a mortgage.
While paying down debt is easier said than done, the benefits associated with good credit scores make doing so well worth the effort.
