Having a Good Credit Score Is Important Because It Saves Money
Updated: June 12, 2020
It’s possible to go through life with bad credit. The problem is that it makes life expensive and difficult. If you prefer to be less stressed, then you should have and maintain a good credit score for future use. Having a good credit score is important because it saves money and offers many financial perks that just make life better. Below, we’ve identified six benefits of a good credit score.
Way 1: A Good Credit Score Leads to Low Interest Rates
Your interest rate is the cost to use borrowed money, as a percentage of your loan or credit issued. Lenders decide your interest rate based on your credit history, which determines your credit score. A good credit history tells lenders that you pay your bills on time, and manage your credit well. It reassures them that you’ll very likely repay the credit that was lent, plus finance charges. Since you’re low risk, lenders charge you less money.
According to Bankrate.com, a score within 600-679 has an average annual percentage rate (APR) of 22.9%. Move into the 680-739 range and it drops to 17.99%. Bring that score to 740 or more and your APR goes to 12.99%. Higher scores mean you keep more of your money. On a large loan, like a mortgage, this can be equivalent to tens of thousands of dollars. So if your lender suggests that you accept a high interest rate, use your score to negotiate a lower one. If your lender refuses to budge, feel free to shop around. With your good credit score, you’ll find a number of great credit alternatives.
Way 2: It Increases Your Chances to Get Approved for a Specific Card or Loan
Do you know who gets the best credit cards with the most amazing perks? It’s usually the people who have good credit on top of the steady income and strong debt management skills. Your good credit can grant you no annual fees, 0% APR, and high credit limits. Card issuers may also offer other exclusive high-value benefits. Loan lenders may offer the best terms on your loan, like lower interest rates, large loan amounts, and payment flexibility.
Way 3: You Receive Better Car Insurance Rates
Your bad credit can be used against you even if you’re not trying to get a credit card or a loan. Car insurance companies view bad credit scores as a risk. They believe the people who have poor scores tend to take more risks and file more claims than other people. As a result, car insurance companies will penalize applicants with bad credit by charging them higher premiums. (If you are a resident of California, Hawaii, or Massachusetts you are exempt from this.)
Way 4: You Get Easier Approval For Rental Houses
Another way your bad credit can be used against you is when applying for a place to rent. Many landlords use credit scores when screening potential tenants. A bad score is not an immediate rejection, but it can be if combined with outstanding rent or eviction. If the landlord accepts your application, you will have to pay a higher deposit than a good credit applicant. Having a good credit score saves money. It also saves time and effort looking for a landlord with decent rentals who will overlook awful credit. These options are few and far in-between.
Way 5: A Good Credit Score Helps You Get Cheaper Cell Phone Plans
Yet another way bad credit can affect you is with your cell phone service provider. Show up with good credit score and you can qualify for any post-paid service. They may even throw in their best phone packages for free, or with a very generous payment plan. Bad credit score applicants may be directed to either put down a security deposit or purchase a pre-paid plan. They also are unlikely to qualify for free or discounted phones.
Way 6: You Avoid Security Deposits on Utilities
Congratulations, you’ve moved into a new home. Now you need to get your utilities hooked up. As a new customer, they may ask to perform a credit check. If your score is bad, they’ll require you to pay a deposit of up to $200 to initiate the service. New customers with good credit may have the fee waived.
Save Money With a Good Credit Score
Your credit affects many different parts of your finances that aren’t directly connected to credit cards and loans. You could neglect your credit score since it’s possible to live without good credit. It’s just that you run the risk of wasting thousands of dollars annually through deposits, higher rates, and missing discounts. The best reason for why you should have and maintain a good credit score is to save money.