A negative credit history can induce a stressful situation when applying for financing. According to the Fair Issac Corporation, a credit score above 700 is considered excellent, whereas a score below 600 is considered high risk. Lenders take credit scores into account before approving anyone for a loan, and people with lower scores have fewer options available to them. There are numerous benefits to having a good credit record, and recognizing these benefits can prompt you to maintain a higher rating.
Loan Approvals
One of the biggest perks to having a good credit record is securing easy approvals for home loans, auto loans and credit cards. Of course, your income also plays a role in whether you're able to secure financing. But if your income allows you to meet a financial obligation, having good credit is the golden ticket and lenders will approve your loan application with little hassle. On the other hand, a low credit score can trigger a loan denial regardless of whether you have sufficient income to repay the loan.
Lower Interest Rates
Interest rates accompany every loan and credit card, and higher rates inflate the monthly payment on these expenses. But with a good credit record, lenders are more prepared to lower the interest rate on your loans and credit cards because you've demonstrated a good payment history. You're less likely to default or send in late payments, which justifies a lower rate.
Cheaper Insurance Premium
Applications for auto and health insurance request personal information such as name, address and social security number. Insurance providers use this information to run a brief credit check, and if a credit check reveals a bad credit history, these providers are likely to increase your insurance premiums. Quite the opposite, a good credit record helps you secure cheaper premiums. Along with lower insurance rates, utility companies (telephone, power and cable) often waive security deposits when a person has a good credit rating.
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