A good credit score is important since it can help you to save a lot of money in the long run and make your financial life better. Generally a score of 750 and above is considered to be good. Here are a few other reasons you must strive to maintain a good credit score.
Helps you attract low interest rates on loans and credit cards
The interest rate you pay for borrowing money is based on your credit score. So, if you have a good credit score, you’ll be able to attract the best interest rates, thereby pay lower finance charges on credit card balances and loans. Remember, the less interest rate you pay, the sooner you'll repay the amount.
Higher chances of credit approval
A high credit score denotes that you are a responsible borrower, which means lesser risk on the lenders part. This naturally increases one’s chances of getting approved for a loan or a credit card, that too at lower interest rates.
More negotiating power
A good credit score gives you the power to negotiate a low interest rate on a loan or a credit card. In order to enhance your bargaining power, you can even take advantage of other offers you have received from various other financial institutions. With a low credit score, on the other hand, you can barely negotiate the interest rates, as the lender will consider you to be a high-risk candidate.
Higher credit limits
Your credit score and income combined determines your borrowing capacity. So, if you have a good credit score and a steady flow of income banks will readily lend you more money, as your credit score reflects that you’ve paid back the borrowed money on time. However, if you have a poor credit score, you may still get approved for credit cards, but at a lower credit limit.
Better job prospects
If you have a good credit score, you can easily get hired for certain jobs. How? When it comes to hiring, companies want to make sure that they are driving in the best people. And so, in some cases, they go through your credit report or credit history. If they come across any record of late payment, they might assume that you aren’t suitable for the required position.
Lesser security deposits
If you’re looking forward to renting an apartment,you‘re probably going to need to deposit a certain amount of security money. A security deposit involves 1-2 months that is taken by the landlord to protect the landlord from any kind of damages caused to the rental. Generally, the cost of any repairs is deducted from the security deposit, and the rest is refunded to the tenant.
That said tenants with good credit score will be required to pay low or even security deposits, whereas tenants with poor credit score have to pay huge security deposits.
Better car insurance rates
Insurance companies monitor your credit report and insurance history to generate your insurance risk score. They tend to penalize people with low credit scores with higher insurance premiums. However, people with low credit scores will pay less as compared to borrowers with higher credit scores.
Ways to improve your credit score
Here are a few ways by which you can improve your credit score.
Frequently Asked Questions
There isn’t a specific number for a good credit score. As a thumb rule, the more you want to borrow, the better your credit score should be. Generally, a credit score of 750 and above is considered to be above average.
The factors deciding your credit score are payment history, amounts owed, length of credit history, new credit, and credit mix. In order to improve your credit you need to work on these factors. But don’t expect anything to happen overnight.