Good credit. The phrase may have crossed your mind more times than you can count. There's a rationale behind that.
Because credit can impact many areas of your life, it might affect where you reside, how much money you can borrow, and how certain employers might consider your application for a job. Continue reading to learn more about the advantages of having high credit and how you may strive to build your own.
What's a good credit score?
A good credit range relies on the source of the score and the person evaluating it. You can have many credit scores because there are various scoring firms. According to the Consumer Financial Protection Bureau (CFPB), "the credit-reporting agencies will issue you a credit score based on your credit reports. Each business calculates its credit score, so you don't just have one.
According to FICO®, one organisation that assigns credit scores between 670 and 739 is considered good. Scores between 661 and 780 may be regarded as good by VantageScore®, another credit-scoring business. Additionally, very good, outstanding, and exceptional scores are acceptable.
Knowing that data from your credit reports form the basis of your credit ratings may also be useful. Credit-scoring firms like FICO and VantageScore use intricate formulae known as scoring models to determine scores.
What are the benefits of having a good credit score?
The advantages of having good credit might range from lower credit card interest rates to cheaper auto insurance.
Since the data in your credit reports determine credit scores, a higher score indicates that your credit is in good standing, which may be the key to obtaining these eight advantages:
Improved Car Insurance Rates
Auto insurance comes first. When you apply for coverage, some insurance firms could use your credit ratings to inform various judgments.
Insurance companies can analyse your credit reports to determine whether to approve your application and how much to charge you, according to the CFPB. Once you become a client, they could run a credit check to determine whether to raise your premiums or even refuse to let you renew your insurance.
Save on Additional Insurance Types
Other insurance providers, such as those who provide home insurance, might also check your credit history.
This is due to the possibility that insurance firms may require the same data as other lenders. This can include the total debt you owe and your track record of timely bill payments. In addition, the information that insurance firms gather about your credit may assist them in calculating the premiums you'll have to pay.
Get Credit Card Interest Reduced
When you apply for one, your credit will probably be checked by the credit card company. A high credit score could make you eligible for benefits like a cheaper annual percentage rate if accepted (APR).
An APR is exactly what? According to the CFPB, interest is the cost of borrowing money and is often expressed as an annual percentage rate for credit cards. The annual percentage rate (APR) is what this is known as. According to the CFPB, strong credit may help you lower your APR because "credit card companies often provide their lowest rates to consumers with the greatest credit scores."
When you wish to upgrade or apply for a new credit card, perhaps one with higher perks and rewards, good credit may also be important.
Obtain Acceptance for Greater Credit Limits
You just discovered how having good credit could allow you to get credit cards with cheaper interest rates. You might also be able to increase your credit card limit.
Finally, having good credit may enable you to obtain larger loans, such as those from banks. Lenders might be more inclined to lend you more money if you have a high credit score because it may indicate that you're a good credit risk.
Have more options for housing
Your quality of life can greatly impact where you live, right? In this case, having good credit can also be helpful. That's because landlords might examine your credit history when you apply to rent an apartment.
You might be able to secure a mortgage for a house at a reduced interest rate with good credit. According to the CFPB, you are more likely to get a good interest rate on your mortgage loan with a stronger credit history.
Loan and credit card limits that are higher
If your credit score is high, you may be qualified for bigger loans, such as the jumbo loans required to obtain a mortgage in some regions with a high cost of living. In addition, you might potentially be eligible for credit cards with greater limits.
For instance, according to a recent Experian survey, the average Baby Boomer had a credit score of 731 and a credit card limit of almost $40,000. However, the average Millennial under 35 had a credit score of 668 and a credit limit of about $20,000. It's important to note that because the length of your credit history affects your overall score, Baby Boomers have had more time to establish strong credit.
Rental property approval is easier.
Even if you never intend to purchase a home, you'll still need a strong credit rating. Many individuals are unaware of this, but landlords will evaluate your credit score when deciding whether to rent to you. A history of on-time payments is more likely to appeal to a landlord than someone with many delinquencies, so if you have a decent credit score, you have a better chance of being approved as a renter. If not, you might have to put down a larger deposit, sign a short-term lease, or perhaps lose your housing altogether.
Increased Chances of Being Approved for Credit or Loans
You understand how upsetting it is to reject a loan or credit card application. It might be difficult if you were turned down for finance for a necessary item, such as a car or a home. And if you aren't qualified for other loans, like private student loans, which help many people pay for education, it can be devastating. However, improved acceptance chances come along with a higher credit score. Of course, lenders take other factors into account as well, but your credit score is a crucial one.
Conclusion
A good credit score is what? You have good credit if your FICO score is higher than 670. Understanding how your credit habits may be enhancing or detracting from your credit score is crucial because there are many advantages to having high credit, such as getting access to better credit cards and reduced interest rates.
You'll be able to benefit from all of the advantageous financial prospects linked to good credit after you understand how to build credit.
