Your reputation is one of the most important things about you. It says a lot about who you are, what you’ve done, and what you’re liable to do.
This also applies to finances. That’s the whole reason credit scores exist.
If you have a low credit score, you may find yourself hitting roadblocks that other people aren’t. You may find it difficult to secure a loan, buy a car, or even put a down payment on a house.
But, you can always improve your score, and there are plenty of perks of doing so.
Let’s take a look at seven ways having an ideal credit score can positively impact your financial reputation.
A Brief Overview
Your credit score is a number that ranges from 300 to 850, with the latter being a better value.
This range is broken up into the following categories:
- Excellent (750+)
- Very Good (700-750)
- Good (650-700)
- Bad (600-650)
- Very Bad (Below 600)
There are also a handful of factors at work when determining your score, including:
- Payment History
- Card Usage
- Number of Accounts
- Age of Accounts
Now, let’s move on to see what having good credit (650+) has to offer you.
1. Lower Interest Rates
Interest is how lenders profit off of letting people borrow money from them. There is, however, the off chance that borrowers won’t (or can’t) pay their loan back.
Therefore, lenders charge people with a poor credit rating a higher interest rate because they are taking a risk by lending money to someone with a shaky financial history.
But, if your credit score is in the upper ranges, you’ll find that lenders will often give you a much lower interest rate than normal because you’ve proven that you can be trusted to pay off debt.
2. Forego Security Deposits
Like with higher interest rates, security deposits are a protective measure put in place against people who are seen as a financial liability.
When you set up an account in your name for a utility service, the service provider may charge you a security deposit so that they can cover their losses if you don’t pay your bill.
However, having good credit may cause them to waive this fee. Since these deposits can sometimes be hundreds of dollars, you’ll have a much easier time relocating if your score is high.
3. Higher Credit Limits
Great credit allows you to access higher credit limits. While many people who are financially responsible don’t max out their credit cards each month, having a higher limit can be a blessing.
For example, if you need to make a large purchase (such as a new television or computer) but don’t have the money in your checking account at the moment, a higher credit limit will allow you to do so without having to borrow money from anyone else.
Spending large sums of money at once can be addicting for some people, so make sure you don’t make large purchases a habit.
4. Negotiation Leverage
When searching for a loan, you’ll often find that repayment plans are more or less concrete. They could be 12 months, 24 months, or even shorter periods like six months.
But, let’s say that you need to borrow a large sum of money, want a lower interest rate, and need a long repayment period. If you have a credit score that shows that you’re reliable, though, you’ll have more leverage when negotiating these terms.
Even if you don’t need a large sum of money or a long repayment period, you can always shoot for a lower interest rate when browsing through different lenders.
You can also save yourself time by looking through financial comparisons of different lenders rather than researching each one on your own.
5. Faster Approval for Property
Landlords use credit scores to screen potential tenants when people apply to move to a property. Unfortunately, having poor credit is almost always a dealbreaker if you’re looking to relocate to an upscale area.
This is especially true if your credit history involves an eviction or late rent payments.
Having a high credit score means most landlords would be happy to have you, which can save valuable time when looking for a new place to live.
6. Credit Rewards
There are credit cards out there that offer outstanding perks to the cardholder. But, you won’t have a shot at getting approved for one unless you’ve already built up your credit over the years.
Some of these benefits include a signing bonus (sometimes as much as a few hundred dollars), large cashback amounts, and travel points.
Since these types of cards allow you to save large sums of money over time, you should try to raise your secure and secure one as soon as possible!
7. Improved Rates on Car Insurance
Car insurance companies won’t hesitate to penalize you for your poor credit rating. Someone with a negative financial reputation is sure to experience higher premiums.
As previously mentioned, a high credit rating shows that you’re responsible, and thus less of a risk. Your premiums will be much lower if you keep your score in the “Good” or “Very Good” range.
This, of course, will allow you to have an easier time managing your payments, which will help keep your score high.
Obtaining the Ideal Credit Score Can Seem Difficult
But it doesn’t have to be. As long as you make your payments on time from month to month, your score will improve as the years go on. Then, once you have access to the perks of an ideal credit score, you’ll be able to make sure your score stays high.
Need other ways to help improve your financial reputation? This article has plenty of information.