5 benefits of having great credit


Great credit can give you the proverbial keys to the kingdom.

Unless you live under a rock – one without Wi-Fi – chances are you’ve heard half a dozen commercials just this week about the importance of checking your credit scores. But what a lot of these ads fail to convey is Why.

Of course, we all know that a credit card issuer will check your credit when you apply. But credit checks aren’t just about credit cards and loans. These days, your credit is checked for just about everything. Do you have a new apartment? Credit check. Are you requesting a new cell phone line? Credit check. Looking for a new job? Yes, you guessed it, there will likely be a credit check.

People are clearly concerned about your credit history. The advantage of all of these credit checks, however, is that an impressive credit score can open many doors. Here is a look at just five benefits of having good credit.

1. Easy approval for most credit products

One of the best parts of having good credit is having your choice of premium credit cards. Do you have an eye on that luxury travel rewards card? Dark! Want that awesome new cash back card? Give it a shot!

With great credit, most credit card issuers will be happy to have you, which means you can probably get approved for almost any card you want. Unless a card is invitation-only or the issuer has restrictions, your chances of getting approved are pretty high when you have good credit.

And it’s worth more than credit cards. Personal loans, car loans, mortgages – these are all available when you have great credit.

2. Low interest rates on loans and credit cards

Not only does good credit get you approved for just about any credit card or loan you need, it also means you’ll get the best interest rates. Most credit products have a range of annual percentage rates (APRs) at which your rate is set. The better your credit history, the more likely you are to be assigned an APR on the lower end of that spectrum.

For example, if a credit card has an APR range of 14.99% to 24.99%, the applicant with excellent credit will likely be offered the rate of 14.99%. Likewise, an applicant with a lower credit score will most likely be offered a rate towards the end of 24.99% of the range.

Since the amount of interest you pay on a loan or credit card balance is determined by the APR, a lower rate can save you a lot of money. This is especially true when it comes to long term loans, such as auto or mortgage loans, which can cost you thousands in interest over the life of your loan.

3. Higher credit limits and larger loans

Your credit history is also a factor in the amount of credit you can get. When you apply for a credit card, the size of the line of credit available to you depends on both your income and your creditworthiness. Applicants with excellent credit will receive much higher spending limits than those with lower scores, even if they have similar income levels.

This also goes for the loan amount that you can get. While you’re still capped by your income (and, in some cases, your down payment) to some extent, you’ll be much more likely to get the loan you want if you have the right credit to back it up.

4. No (or low) deposit for rentals and utilities

As mentioned at the start, your credit history will impact more than your credit cards and loans. Anytime you ask, well, almost anything, your credit can come into play. Indeed, many companies use your credit history to assess the risk of doing business with you.

In other words, when you set up new utilities, apply for a new apartment, or even set up a new cell phone plan, the company is going to do its research on how you’ve paid your bills in the past. A good credit history shows that you can manage credit and debt responsibly, so there is less risk of you not paying what you owe.

The deposit you are asked to pay when setting up new accounts or getting a new apartment is how the business is mitigating its risks. If you are seen as a risky customer, he will ask you for a larger deposit. Low-risk customers demand lower deposits or sometimes no deposit.

5. Reduced home and auto insurance premiums

Your level of risk also comes into play when you get insurance. Accurate or not, consumers with lower credit scores are often viewed as a financial risk. That’s why credit checks are a regular part of insurance applications, whether it’s home or auto insurance.

If your credit is good, there’s a good chance you’ll be offered lower insurance premiums than someone with similar needs but a lower credit score. This could mean a difference of tens or even hundreds of dollars in bonuses over the course of a year.

It’s never too late to get good credit

While you can still get by in today’s financial world without credit, it is definitely getting more difficult. Between digital payments and skyrocketing home and auto costs, the ability to live a life without credit is shrinking.

Fortunately, it’s never too late to improve your credit. Many credit building products, such as secured credit cards, can be obtained even if your credit is poor or limited. Plus, nothing stays on your credit reports forever, and even major mistakes will eventually go away. Pay your bills on time, keep your card balance low, and your credit should increase over time.

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