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Credit scores are a valuable indicator of an individual's financial responsibility. The higher your credit score, the more likely you will be approved for an apartment rental, mortgage, and pay less for auto insurance.
Here are 15 benefits to having a high credit score.
15 Benefits to Having a High Credit Score
1. It's Easier to Secure a Loan With A Good Credit Score
A high credit score allows you to secure a loan more easily.
Lenders know that borrowers with high credit scores are less risky and more likely to repay their debt on time. The higher the credit score, the lower the interest rates. It’s that simple. Late or missed payments can drastically lower your good credit score.
Lenders also prefer to offer loans to borrowers with high credit scores because these individuals are less likely to default. Those with a poor credit score are more likely to have a checkered payment history.
If you plan on borrowing money any time in the future (auto loan or mortgage), a good credit history will make it easier to secure the loan.
2. You Pay Less Interest on Loans
People with a low credit score will pay much more interest on any loan or credit card.
When you have a high credit score, you can save hundreds or even thousands of dollars in interest payments over the life of your loan.
A simple 1% difference in interest rates will save you tens of thousands of dollars on your mortgage. It pays to have clear credit reports.
3. Better Renting Opportunities
Many landlords check applicants' credit scores before approving them for a lease.
Landlords will perform a credit check and prefer high-credit tenants as they pay rent.
Those with the highest credit score are more likely to take care of the property and treat it as their own home.
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Having a lower credit score makes it difficult to find a decent apartment or house to rent.
4. Better Job Opportunities With A Clean Credit History
Many employers check your credit history before making an offer of employment.
Companies prefer employees with good financial responsibility because they are less likely to start fights or steal money from the company.
Having poor credit may be the determining factor in being hired or not.
5. Pay Less for Insurance
Good credit will qualify you for lower car insurance rates seeing you are considered low-risk.
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Insurance companies know that individuals with a strong credit score have been responsible and dependable in the past. Hence, it is unlikely they will file many claims or cause other problems.
6. Pay Less on Your Mortgage
Mortgage lenders like to see high credit scores because it means that you're a low-risk borrower. When you have a good credit score, you may be able to qualify for a lower interest rate on your mortgage. You could save thousands of dollars over the life of your loan.
Borrowers with a high credit score will qualify for lower insurance rates because they are considered low-risk. Insurance companies know that these individuals have been responsible and dependable in the past.
7. Save Money on Utilities With A Clear Credit Report
There’s a reason utility companies ask for your social security number. They’re pulling your credit report.
Your utility company may require a security deposit if you have a bad credit score and waive it for those with a strong credit history. Avoiding a deposit is one of the many benefits of good credit.
8. Get Better Car Loan Rates
You qualify for a lower interest rate on an auto loan with an excellent credit score. Interest rates for any type of loan are based almost entirely on your credit reports.
With a bad credit score, you may have no other choice but to go to a car dealership that offers in-house financing and pay up to 20% APR on your loan. Pair the car insurance with that payment, and your overall financial health is in bad shape.
9. Higher Credit Limit Approval
Those with a good score receive a higher credit limit. If you have an emergency and apply for a personal loan or use a credit card, it’s nice knowing a large bill won’t ruin your financial life.
I remember being in my early 20’s with over $100,000 in available credit. When my car needed an expensive repair, I was thankful to use my credit card for that.
Having a high credit limit is a great thing to have for security because life throws curveballs.
10. Easier to Start a Business
Starting a business is very difficult. In the beginning, there never seems to be enough money to make everything work.
You can apply for a small business loan and save money on interest with good credit.
11. Good Credit Card Deals
The amount of money credit card companies give away as incentives is absurd. I am reminded they give those incentives hoping you will carry a balance and make the minimum monthly payments until you die.
Still, with good credit scores, you will be solicited by several companies to sign up for their credit cards. I run a personal finance analysis to see if the perks make sense when I receive these offers.
I received approval for was this offer recently: spend $1000 and get back $100. That’s a 10% return on money I was already going to spend.
12. Rent Without a Cosigner With Higher Credit Scores
Renting with a cosigner on your college apartment makes sense. You’re young and don’t have much more money than the guy panhandling down the street.
Once you’re older, you want to make sure you don’t have to call mom and dad to cosign your apartment. Being independent is one of the vast benefits of good credit.
13. More Negotiating Power
Simply put, the highest credit scores receive the best treatment. When going for a mortgage, you can pit lenders against one another to benefit you.
You have access to lower interest rates, and they may waive a lot of the stupid fees lenders charge when underwriting a loan.
Remember, (nearly) everything is negotiable.
14. More Availability on Loan Products
Want a shorter-term? Want a longer-term to pay less interest?
You are in the driver's seat when you have a good credit score.
Lenders love giving money to those with a high credit score and despise those with poor credit.
15. Bragging Rights
There’s something about taking a screenshot of your high credit score and showing your friends how disciplined you’ve been. I find it similar to having more money in the bank, but that’s coming from a finance nerd. Take it with a grain of salt.
A Good Credit Score Is Helpful In Many Ways
A high credit score is beneficial now and in the future.
Keep improving your credit scores, and you will see progress throughout time.
Life is a marathon, not a sprint.
As a certified credit counselor and syndicated writer at MaxMyMoney, Max has coached over 250 Millennials to help take the stress out of money. When Max is not coaching, you'll find him reading financial books, indoor cycling, or visiting local pawn shops looking for swiss-made watches.