What a High Credit Score Can Do for You

A credit score is a three-digit numerical measure of an individual's creditworthiness. TransUnion, Experian and Equifax -- the three major credit bureaus -- use the FICO algorithm, which takes into account a consumer's credit report information including payment history, debt owed, length of credit and types of credit, to calculate these scores. Credit scores range from 300 to 850, with scores above 640 considered good and ratings above 720 considered excellent. You can gain many advantages by having a high credit score.

Interest Rates

Having a good to excellent credit score allows you to get lenders' and credit card companies' lowest interest rates. For instance, according to a June 2008 article from Bankrate.com, individuals with 720 credit scores or higher receive mortgage interest rates nearly a full percentage point lower than people with credit scores of 620, the minimum score to obtain most mortgage loans. Paying lower interest rates can save you hundreds, if not thousands, of dollars over several years' time. Additionally, an excellent credit score allows you to negotiate with lenders for better interest rates, fee schedules and loan or credit card terms.

Credit Limits

In addition to favorable interest rates, lenders also give other benefits to people with good to excellent credit scores. If you have a good to great FICO score, credit card companies will often allow you higher credit limits on your cards, giving you more purchasing power. This will allow you greater access to funds in times of financial need. Additionally, having high credit limits further improves your credit score, as the FICO algorithm takes debt-to-credit ratio into account.

Utilities

Cellular phone, home telephone, cable, Internet and electric and gas companies often check individuals' credit reports, requiring people with low credit scores to make deposits or pay fees, or even denying them service in some cases. By having a good credit score, you avoid those hassles and charges, saving money and time. Additionally, some phone, cable and Internet companies will offer you lower-priced service plans if you have a good-to-excellent credit score

Insurance

Many automotive insurance companies check credit scores before issuing coverage. These companies will either deny people with unsatisfactory credit scores insurance coverage or charge them higher premiums. Having a high credit score allows you to avoid those pitfalls and may even earn you a discount on your car insurance.

Employment and Rent

Employers often check credit when performing background checks on potential new hires. While having a poor credit score could get a person turned down for a job, possessing a good credit score may give you an advantage in your job search. Additionally, most landlords pull credit scores and reports on applicants for apartments and rental houses.