What are the benefits of having a good credit score?
As a new college grad, the idea of things like credit and credit score can seem a little cryptic. “What’s so good about having a good credit score anyway”? This is a common question that is often asked, and the benefits may not be immediately apparent until 5-10 years down the line, when having a good credit score really matters. However, by then of course, it’s already too late to build it. It is thus important to start building your credit score now so that you can benefit from it later, and this article explains exactly what a good credit score can get you.
1). Lower Interest Rates on Big Loans
It is almost inevitable that at some point in your life, you will need to take a large loan to finance a large purchase: a home or a car, for example. These loans are normally ones that are hundreds of thousands of dollars spanning a multitude of years. What this means is that the interest rate on the loan matters a lot: even a 1% difference in the interest rate can mean a cumulative interest difference of tens of thousands, or even hundreds of thousands of dollars. Having a good credit score means being able to get that lower interest rate- in other words, a good credit score will literally save you thousands of dollars in interest.
Another benefit with this in regards to large loans would be having more options available to you. Simply put, the higher your credit score, the more willing loaners would be willing to loan to you, and the more loan options you would have available to you. Of course, this means you would be able to pick and choose the best offer from this wide variety of choices, ultimately resulting in a great loan agreement.
2). Newer and Better Credit Cards
One of the criteria used to approve new credit card applications actually is your credit score. This means that having a good credit score will help you obtaining new credit. In addition, having a good credit score can help you get a credit card with better deals or additional benefits, such as travel rewards or an extra percent in cash back. Over a long period of time, those additional benefits can lead to a lot of money or savings.
3). Larger Credit Limits
Your credit limit is fixed at a small amount when you get your first credit card and your credit score isn’t established, however, over time as your credit score builds, you can get approved for larger and larger credit limits. This is convenient when making large purchases on credit, and having a good credit score is one of the only ways that the bank would approve these increases.
Many landlords and apartment rental companies utilize your credit score to determine whether you are financially trustworthy/able to pay your rent. Your chances to get approved will thus be higher if you have more credit. It also means that you will have housing options available, because more landlords would be willing to give you an offer. The extra benefit as a result of this is saving time: you won’t need to search as long to find an apartment.
5). Not Having to Pay Security Deposits
Many companies, especially for housing, car rentals, or utilities, require a security deposit to ensure you’re able to pay and are willing to make a down payment. These can occasionally be a large hassle to deal with. Thankfully, some of them don’t have to be paid if you have a good credit score, because it signals to the company that you are financially trustworthy. Thus, having a good credit score can mean the difference between having to pay a security deposit or not.
6). Lower Car Insurance Rates
Your credit score is often the criteria for determining what kind of car insurance you’re eligible for. Often, having a good credit score can help you secure an insurance plan that has lower premiums, compared to other who have a lower credit score. In the long term, this will help you save a large amount of money.
7). Good Signal to Employers
While not super common, employers may occasionally ask to see your credit report when you apply for a job (as long as you give them permission to). This isn’t as big of a factor when deciding your eligibility for the job, but it could make or break your offer if there are some noticeably troubling items, such as late payments or a recent bankruptcy. This ultimately signals a lack of financial stability, and they may think that you won’t stay as a long term employee if your credit score is low enough.
In summary, while a good credit score may not seem all that important straight out of college, it would undoubtedly become valuable and priceless as you venture out and start to get your first car, first home, and new credit cards. Just know that the path to building a good credit score starts today, and CreditStarter can help you start to build that excellent credit, so that you can cash out and save big in the future.
Alt Text 1: Good Credit Score can net you better Credit Cards
Alt Text 2: The higher your credit score, the lower your auto insurance rate
Page Title: 7 Benefits of having a Good Credit Score