Your credit score is a three-digit number that carries significant weight in several arenas. The major type of credit score is provided by FICO and ranges from 300 to 850, with higher scores for individuals who pose lower risks to creditors. According to the Bankrate website, K.E. Varner, a former manager at credit reporting agency Equifax and the author of " The Insider's Guide to Credit Repair," claims a credit score over 700 is considered good, although people should shoot for scores of over 750 for the best results.
Easy Approval
If you have a high credit score, you will not have much trouble getting approved for new credit, such as a car loan, mortgage or credit card. Landlords also use credit checks to screen applicants, so a good credit score will make it easier for you to rent a home or apartment. In addition, you may have an easier time starting service with a utility provider, such as a cell phone company or cable company. These providers often run credit checks before starting service and waive deposits for people who have high credit scores.
Low Interest Rates
Interest rates are inversely related to credit scores. People with high credit scores typically get low rates, whereas people with low credit scores pay high interest rates. This is because the lender runs a larger risk of not having the debt repaid by people with low credit scores, so the lenders charge higher interest rates to compensate for that risk. Paying a lower interest rate can save you thousands of dollars in the long term. For example, if you have a mortgage loan for $200,000 to be repaid over 30 years, your monthly payment is $65.04 lower with an interest rate of 6 percent than it is with an interest rate of 6.5 percent. This amounts to a total savings of $23,414.40, just for having a good credit score.
High Credit Limits
If your credit score reflects a consistent history of paying back your debt on time, you are more likely to have lenders offer you high credit limits. This is because your credit history gives lenders confidence that you will repay the money they lend you. High credit limits provide the flexibility to borrow more money.
Low Insurance Premiums
Insurance companies often factor in an individual's credit score when determining insurance premiums. Statistics show that people with low credit scores are more likely to make insurance claims than people with high credit scores. Therefore, the companies charge higher premiums to the riskier individuals. You can get the best insurance premium possible by having a high credit score.
More Employable
When you apply for a job, potential employers often ask for your Social Security number to run a credit check. Employers can use your credit history as a factor to determine whether to offer you a job. This is because responsibility with personal finances often translates to responsibility with job duties. In addition, people who have low credit scores likely have stressful financial obligations that may impact their ability to focus at work.
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