Credit checks are happening now more than ever. Credit checks are not just to see if you qualify to borrow money. To sign-up for utilities, buy a cell phone, or rent an apartment, a credit check is usually done. Even employers can check your credit scores before hiring. Having good credit is now more important than ever.
Here are 5 benefits of having good credit:
1. Larger loans and higher credit limits
Not only does having a good credit score improve your chances of being approved for loans and lines of credit, but it can help provide you access to higher amounts of money. The amount of money you are able to borrow is based on your income and your credit history. If your credit history is healthy, lenders and credit card companies will be more likely to grant you higher loan and credit amounts. It shows banks and credit card companies that you can responsibly manage the money you borrow. If you have good credit, you may be able to borrow more money.
2. Lower auto insurance premiums
Your credit history also affects the price of car insurance premiums. While auto insurance companies cannot refuse coverage because of your credit history, they can charge you more if your credit history isn’t good. Car insurance companies take several factors into consideration when they calculate premiums, and credit history is one of those factors. If insurance companies consider you a higher risk, they will charge a higher premium. A healthy credit history means that you manage your finances responsibly and you’re more likely to be a responsible driver. If auto insurance companies consider you less of a risk, based on your credit, your premiums will be lower.
3. Easy approval for most credit products/ more opportunities
When you have good credit, you’ll have access to more financial opportunities. Financial institutions and credit card companies want to ensure that they are working with stable consumers who have a history of paying their debts back on time. If your credit history and credit score are healthy, it’s more likely that you will be approved for loans or lines of credit. If your credit history and credit score reveal poor debt management, your chances of being approved for loans and credit cards will be reduced. In fact, depending on what your history and score are, you may be completely denied.
4. Low interest rates on loans and credit cards
Not only does having good credit make getting approved for a loan or credit card easier, but it also makes it more affordable. When you borrow money or open a line of credit, you are charged an interest rate. An interest rate is an amount of money a lender or credit card company charges for borrowing money. You must repay the amount you borrowed, and also pay the interest rate. The better your credit is, the lower your interest rates on loans and credit cards will be. Lower interest rates can save you a large sum of money long term. And poor credit scores lead to higher interest rates on loans and credit cards.
5. Lower or waived deposits for rentals and utilities
If your credit is poor, when you open up an account with a utility provider, you may have to pay a security deposit. Utility providers such as cell phone, cable, internet, and electric companies check the credit history to determine whether or not they can expect on time payments. Those who have poor credit are often charged a security deposit to open an account. These deposits ensure that utility companies have access to funds to pay your account in the event that you fail to make payments. While the expense varies, these security deposits can cost upwards of a couple of hundred dollars. If you have a good credit score, you probably won’t be charged a security deposit for your utilities. How much could you save by not having to pay security deposits for your utilities, cell phone, etc.?
Luckily, it’s never too late to improve your credit. Sign up for RentPlus and build your credit while renting. Also, many credit-building products, like secured credit cards, can be obtained even if you have poor or limited credit. Pay your bills on time, keep your card balances low, and your credit will improve over time.