What Are the Benefits of a Good Credit Score?

Introduction

There’s no doubt that having a good credit score comes with lots of advantages. But how exactly does it positively impact your life?

Credit score calculations, whether FICO® or VantageScore®, are based on several factors in your credit report: length of credit history, amounts owed, new credit, credit mix, and payment history. And, according to myFICO, 90% of lenders use versions of these scores to make lending decisions.

So the advantages of good credit factor into almost every aspect of your life, whether you’re hoping to purchase your first car or get approved for a loan to start your small business. Credit veterans and rookies alike have to face the same obstacles, and a high credit score makes it easier to clear those financial hurdles and move forward.

Creditworthiness

“Creditworthiness” is a phrase that gets tossed around a lot. But it basically means the likelihood you are to receive financial credit, based on how reliably you’ve paid money back in the past.

Creditors see good credit as a sign of trustworthiness and offer cards with significantly better interest rates, generous credit limits, lucrative introductory deals like 0% APR, and top-tier rewards like airline miles or cash back as a result.

Lower interest rates on credit cards and loans

The moment you apply for a credit card or loan, your current credit report and score are provided to the person or company making the decision. And better credit generally means better terms. So if you have a good credit score, you’re more likely to be approved for lower interest rates, which could save you thousands of dollars over time.

Better chance of approval for higher borrowing limits

Lower rates are just one piece of the equation. You’ll also likely be offered higher credit lines when you have better credit because the lender assumes you’re not going to default on the loan or neglect to pay your card balance. This not only gives you more wiggle room when you need some money, but it makes it easier to keep your credit utilization ratio low … which in turn helps your score go up even more.

More negotiating power

If it turns out you’re not offered the terms you think you deserve, you can ask for better rates and higher credit lines. Good credit gives you more negotiating power when it comes to getting the financial deal you want. If you already have a credit card or line of credit with a lower limit, a simple request can lead to a credit line increase — as long as you have a good credit score to back it up.

Home and Car Costs

Poor credit can hit home in a pretty hard way. But good credit makes things quite a bit easier, in several key areas.

Easier approval by landlords

Having a great credit score lets you snag prime mortgage rates when buying a house, and you’re more likely to be approved for that dream apartment or rental home. And then, if you have a good credit score, you can even avoid having to put down a security deposit on utilities. Companies trust that a customer with a higher credit score will be able to make monthly payments on time.

Better car insurance rates

You already know that the higher your credit score, the less you’ll probably pay in interest on an auto loan, but it gets even better. Believe it or not, your credit score affects your car insurance rates. That’s right — car insurance companies often pull credit reports to determine your monthly premium, so good credit means you pay less for the same coverage.

Work and Personal Life

We’ve established how your own financial life is impacted by your credit score. But it goes deeper than that, affecting several areas of your personal life as well. And if you’re part of a couple embarking on major financial investments together — such as a wedding, home purchase, or having children — you might struggle to get the loan you need if one of you has poor credit.

Cellphone contracts without security deposits

Like your utilities, you can avoid having to make a security deposit on your mobile phone plan if you have good enough credit. And that means not just your own device, but the whole family’s communication needs if you’re the manager of a family plan.

Look better to potential employers

The benefits of a solid credit report and a high credit score even factor into your career ambitions. In most states, employers can check credit reports before making a final offer, so good credit can directly impact your livelihood.

Bragging Rights

Finally, on top of all these other benefits, having good credit gives you bragging rights. It’s not cool to brag about how much money you have, but it’s OK to brag about your credit score. Especially when you’ve worked hard to raise your credit score from poor or average to good or excellent.

An important part of building a high credit score is having the right credit card as a trusty tool. When used strategically to increase your positive credit history, Credit One Bank credit cards can help you pursue opportunities that come from having good credit.