Your good credit score demonstrates a sign of trustworthiness to your creditors, like bankers and investors, and to any person to whom you owe any payment like your landlord, your prospective employer, a shop owner, or a utility service provider. A good credit score is what makes you a responsible borrower, which brings huge financial benefits from your current or future creditors. However, building a great credit score is a herculean task that demands a great level of patience and discipline.
Related Article: 10 easy ways to repair your credit score
What Is A Good Credit Score?
A good credit score is the rating given to a person or organization based on his or its good credit report which is based on his or her responsible credit activities. For a credit score ranging from 300-850, a score of 700 or above is generally considered good. Most credit scores fall in the range of 600-750. FICO Scores and VantageScore are the most common types of credit scores, but industry specific credit scores also exist.
Credit scores are used by the lenders such as a bank providing a mortgage loan, a credit card company, or even a car dealership financing auto purchases to decide on (1) whether or not to offer you credit, and (2) on what terms to offer. A better credit score represents better credit decisions and it gives confidence to the creditors that you will repay your future debts as agreed.
Here are the 6 benefits of a good credit score:
Makes It Easier to Get A Job: It certainly isn’t the sole criteria for offering you a job, but employers look at it from a responsibility standpoint. For many jobs, especially the ones related to money handling, or accessing sensitive financial information, having a good credit history is like having the half hurdles crossed in getting the job.
Gateway to the Best Credit Cards: Credit cards with awesome perks, great rewards, cash back, and low rates are considered to be the best credit cards, and you’ll need a stellar credit score to have access to them. These credit cards also comes with larger credit limits which increases your credit worthiness over time, making the bankers more willing to extend larger loans to you.
Cheaper Home, Car And Deposit Costs: Your trustworthiness or creditworthiness that comes with your stellar credit score can ease your efforts like leasing an apartment or a home, or getting a better car insurance rate. Insurance companies pull credit reports to determine your monthly premium while banks will scan them for determining whether or not to provide you loan. With a good credit rating, you can also rent an apartment or home, enjoy cell phones on contract services, or run electricity and water without having to put up-front a big chunk of money as security deposit to the concerned utility company and service providers.
Access to Easy And Cheaper Loans: A good credit score isn’t a sole guarantee for availing a loan or credit, but it certainly increases your chances for the credit approval. Not just that, it also helps in getting loans at cheaper rates. Banks and other financial institutions keep impressive interest rates reserved for equally impressive customers. A good credit score also encourages the financiers to be more willing to extend larger credits to you; in case of a bank loan, it could be a home loan, or car loan.
Makes Your Bargain More Vocal: Having a great credit history will also set you in a position from where you can call the shots while securing the terms of your car loan or your credit card’s interest rate. A practical tip: before negotiating a car finance with a dealership, head to a local bank which can offer better terms than what the dealership has to offer. This way, if the dealer won’t budge then you’ve got the bank as back up.
Payday Loans Don’t Affect Your Credit Score: Cash advance like payday loans don’t affect your credit score. This is because payday loan agencies like CashOne don’t report your loan activities to credit rating agencies. However, if the lender sells the payday loan debt to a third party debt collector, after you failed to pay it on time, the outside party can report it to one or more of the major credit bureaus which can affect your credit score badly.
A good credit score shows your prowess in managing your funds. It also provides you a great first impression to your lenders which makes them more willing to take the risk of lending you their money. That’s why having a great credit score is essential to continue moving forward on your financial journey.