Your credit report is like your transcript for your borrowing history, and your credit score is like your GPA. While your high school grade point average is long behind you, your credit score is still a very important number in your life. Why? Many people know that your credit score helps banks and other lenders decide if you are approved for loans and what you will pay. But your credit score is used for a lot more than just that! Read on to learn about other big benefits of an excellent credit score.
1. Get approved on (almost) every application
If you have a credit score below 700, the odds are high you will be turned down for loans and credit cards reserved for the highest credit applicants. For example, the Chase Sapphire Reserve credit card, which offers thousands of dollars in benefits each year, is reserved for those with the very best credit scores.
Even more standard loans like a mortgage or auto loan are harder to get with a poor credit history. When you walk into the local bank or credit union to apply for any type of lending product, you may have a nervous feeling in the pit of your stomach that you won’t be approved. With an excellent credit score, that worry quickly fades away.
2. Get the best interest rates
Just because you can get approved for a loan does not make it a good deal. In fact, as your credit score goes down, your interest rates go up. This is why lenders targeting the lowest credit borrowers are so bad. Payday lenders, auto title lenders, and rent-to-own businesses use predatory rates to make up for potential losses from low credit borrowers.
When you have an excellent credit score, you don’t have to worry about those unfair lending practices quite so much. Instead, banks and other lenders court you as a potential customer with low rates and other benefits.
3. Get higher credit limits
When you are already under a pile of debt you appear to be struggling to pay off, banks are unlikely to rush to give you more to spend. But when you have excellent credit, banks are happy to give you more and more credit.
My credit score is over 800, and almost every time I have asked for a higher credit limit on a credit card, it has been approved. In fact, some credit card issuers have offered me a higher credit limit without my asking on occasion. Because credit utilization is a factor used to calculate a credit score, these higher limits have only helped lift my credit higher!
4. Get any apartment or rental
When you rent a house or apartment, you are essentially borrowing the place for a monthly fee. Because credit scores are designed to show how risky a borrower is to lenders, landlords also regularly tap into the massive credit database when deciding who gets the keys to a vacant unit.
Depending on the location, some landlords may be used to lending to low-credit renters. However, many landlords will simply turn you away if you come with a poor credit score. However, with an excellent score, you never have to worry about getting turned away. If you can prove you can afford it and have excellent credit, the place is yours. Following the best credit habits will help make it happen.
5. Get phone plans and utilities with no deposit
When you signed up with Verizon, AT&T, or any other major cell phone provider, odds are your credit was checked. The same happens when you setup a new account with your local power, gas, or water company. The utilities and phone companies offer you a monthly service in advance of payment, so there is always a risk you can use the service for a month and run without ever paying your bill. This is why they check your credit.
If you have excellent credit, you have nothing to worry about. The utilities will see your high credit score and open your account without a second glance. But if you have bad credit, you are required to pay a deposit up-front to activate your account. Bad credit is expensive, so do what you can to boost your score and avoid these costs.
6. Get lower insurance rates
Unless you live in New York and take the subway, odds are your car is an important part of your daily life. In almost every state, that means you are required by law to have auto insurance, which is important to protecting your finances. But getting that new auto insurance policy is not automatic and rates are not the same for every customer. Not surprisingly, your credit score comes into play here when setting your monthly rates.
Insurance companies look at a variety of risk factors to set your rates. These include traffic tickets, insurance claims, and your credit score. Insurance companies demonstrated to the government that lower credit scores lead to more insurance claims, so improving your credit score lowers your rates. That can be a massive savings over time. If you can save $10 per month, that is $120 per year. Recurring savings add up fast!
7. Get better job prospects
With a background in finance and accounting, I have held jobs where I have access to a lot of money. Once while working as a bank manager, I held over $300,000 in cash in my hands. That was enough to buy almost any house in the neighborhood! But with responsibility comes risk. After all, a bank doesn’t want someone helping people with their money if they can’t handle their own.
Most jobs nowadays require a background check and a full credit check. A history of bankruptcy, judgements, and missed payments would have disqualified me from an analysis position where I was responsible for watching billions of dollars in annual revenue. But with excellent credit, my employers all knew they had nothing to worry about.
8. Your credit score matters more than you may realize
Your credit score influences much of your personal finances even if you don’t realize it. The reach goes far beyond loans and interest rates and impacts everything from your ability to earn to your ability to find a home.