5 Major Benefits of Improving Your Credit Score
Do you know how improving your credit score could benefit you? Here are a few key ways.
Improving your credit score takes some effort. Depending on your situation, you may need to pay down credit card debt if your score is low because you've used too much of your available credit. You'll also need to make on-time payments over the long haul to boost your score, especially if you've made late payments in the past.
Here are five of the key benefits that you're likely to enjoy if you make the effort and your credit score rises.
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1. You'll have your pick of credit cards or lenders
There are tons of awesome rewards cards available today that provide great perks such as generous rewards for spending on dining or travel, airline lounge access, reimbursement for Uber rides, and more.
Unfortunately, to gain access to the best rewards cards, you'll usually need good or excellent credit. Improving your credit score means you can apply with confidence to even the choosiest of card issuers and score a rewards card you're excited about.
You'll also have tons of choices when it comes to picking a car loan lender, mortgage lender, or personal loan lender if you need to borrow for any other reason. You won't have to worry about being relegated to subprime lenders but can instead pick banks, online lenders, or credit unions that provide perks such as fast approval, career counseling, member discounts, and more.
2. Borrowing will be much more affordable
With good credit, not only do you have your pick of credit card issuers or lenders, but you'll also be offered much more favorable terms by any lender you hope to do business with.
Most credit card companies, for example, offer variable APRs. Your starting APR is determined based on your credit history, and lenders will offer much lower rates on loans if you have good credit.
Scoring a loan at a lower rate could save you thousands. Consider a $5,000 loan that's paid off over three years, for example. If you have good credit and are approved for a loan at 5.5%, you'd be looking at a monthly payment of $151 and total interest costs of $435. But if you had to take out that same loan at 15% because your credit was fair, your monthly payment would be $173 and your total interest costs would be $1,240. In this case, your lower credit score would cost you $805.
On larger or longer-term loans, such as a mortgage, the impact would be even greater. You could end up paying tens or even hundreds of thousands less in interest if you simply improve your credit.
3. You'll be asked to put down smaller deposits
Utility companies, cell phone companies, and cable or internet companies are among the many businesses that check your credit when you become a customer. If they don't like what they see, you may be asked to make a large deposit before you can get a phone or connect to electricity or water.
If you boost your credit score, on the other hand, you'll be seen as a much more trustworthy borrower, and you'll probably only be asked to make either a minimal down payment, or no down payment at all. This means your higher score will allow you to keep money in your pocket that you'd otherwise have had to tie up in order to access a phone or utilities for your home.
4. Your car insurance may cost less
Car insurance is an annoying but unavoidable expense that protects you if you get into an accident or if your car is stolen or damaged. Although you absolutely need sufficient car insurance protection, you likely want to pay the lowest amount possible for it since you'll only use your policy if something goes wrong.
With good credit, you can reduce the cost of insurance because car insurers look at your credit score when setting premium pricing. And of course, keeping your insurance costs low means you can keep more money for yourself that you can use to accomplish other financial goals.
5. Employers won't be scared off by bad credit
If you've applied for a job recently, chances are good that you had to undergo a background check. And with many employers, a review of your credit is part of this background check. If you improve your credit score and have no black marks on your credit history, there will be nothing for employers to worry about -- and nothing for you to explain. -- and so landing your dream job will be that much easier.
Start working to improve your credit score today
Want to reap all of these big benefits for yourself? Then start working on improving your credit today. As you develop a record of positive payments and pay down your debt, your score will rise. You'll become a more attractive borrower, and you'll open all sorts of doors for yourself that can lead to a brighter financial future.
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