The benefits of having a good credit score cannot be overemphasized. Credit scores demonstrate your creditworthiness; thereby determining whether you’ll get a mortgage or any other loan. A good credit score can unlock many benefits, including access to credit cards with favorable terms, more housing options, employment opportunities, loans, and lower interest rates. On the other hand, a bad credit score jeopardizes your chances of getting low-interest loans and credit cards.
As a result, it pays to keep track of your credit score and understand how your financial decisions affect your credit score.
Let’s look at some of the reasons why it’s important to keep a high credit score.
What Is a Good Credit Score?
Credit scores range from 300 to 850, with 300 being the lowest credit score possible. A credit score of 850 is considered excellent. Generally, credit scores ranging from 580 to 670 are considered fair, while anything between 670 and 740 is considered good. Credit scores below 580 are considered poor.
Here’s why your credit score matters:
- Easier to get approved for credit
Lenders are more willing to work with borrowers with a good credit score than those with bad credit. With a higher credit score, you are more likely to be approved for loans, mortgages, and credit cards. While there are some lenders who are willing to work with borrowers with bad credit, their interest rates are extremely high, and their approval process is very rigid.
- More Favorable Loan Terms
Borrowers with a higher credit score have access to more loan products, and they are often given better loan terms. For instance, you can get mortgage products with low-interest rates, big-ticket loans, and a higher credit limit. This can help you make significant savings on interest rates.
- Insurance Discounts
In some states in the U.S., insurance companies use credit scores to determine your premiums. A higher credit score can help you qualify for lower car insurance rates, while a lower credit score can increase your insurance premiums.
- Easier to get approved for a home rental
Most property owners and rental management companies look at credit scores before approving renters. With a bad credit score, most property owners will be reluctant to approve you for an apartment rental. A higher credit score automatically gives you more housing options.
How to Improve Your Credit Score
If you have a bad credit score, all is not lost. You can build it within six months and start enjoying the benefits that come with higher credit scores.
Here’s what you can do to build your credit score:
- Pay your bills on time
- Keep balances low on your credit cards
- Keep your oldest and highest-limit credit cards open
- Check your credit report and dispute any errors
- Avoid expensive credit cards
Building your credit score is a smart financial move. You’ll not only save money in the long run but will also access many positive financial opportunities. Get started today, and you’ll be glad you did.