Achieving and maintaining a good credit score will enable you to fund the major purchases that you’ve been dreaming about. Here are just some of the doors that having a positive credit history will open for you.
More confidence in obtaining a loan
Granted, financial institutions take more than just your credit score into account when you apply for a loan. For instance, they consider your debts and income. But a good credit score will increase the likelihood that you’ll get approved for the loan you need, as The Balance’s Latoya Irby confirms.
Lower interest rates on loans
Per CNBC’s Megan DeMatteo, a good credit score will enable you to secure lower interest rates on a personal loan, regardless of what type of loan it is. She gives the example of taking out a 30-year mortgage on a $300,000 house. A good credit score could save you 1 percent or higher on interest, which could translate to paying at least $200 less per month over the life of the loan.
A higher limit on the amount of the loan
According to Irby, a good credit score often correlates with how much money a financial institution will allow you to borrow. They view a high score as proof that you promptly pay back the money that you’ve borrowed, so they’ll be more likely to let you borrow more money than someone with a poor credit score.
Lower rates for car and homeowners insurance
Most states allow credit-based scoring, which means that insurance carriers assess your risk based on your credit score, as DeMatteo shares. Nationwide, for instance, claims that it lowers premiums for about 50 percent of its customers based on their credit scores.
Better credit card rates
Per Irby, a high credit score will also make it simpler to obtain a lower interest rate on any credit cards you open. This will help you pay off any credit card balances faster and free up more of your cash for other expenses that arise.
An easier time securing a rental
Credit scores are one of the key factors a landlord considers when screening potential renters, as Irby states. For example, a bad credit score caused by an outstanding rental balance or past eviction is a huge red flag for landlords. But a high credit score will improve the chance that you’ll be approved to rent the house or apartment that you want.
Avoid utilities-related security deposits
If you’re relocating, one of the expenses you might have is paying a security deposit if you need to establish utility service for your new residence or transfer your current service to another location. Many utility companies will waive this fee if you have a good credit score, which can save you in the range of $100-200, as Irby confirms.
A good credit score will enable you to secure low rates on major purchases, so you can have the financing you need to enjoy these investments. Contact your financial institution to speak with a financial expert on how you can improve your current credit score, if you need to. You can also speak to them about current deals on financing a car or home that you’re thinking of buying.