Having bad credit isn’t the end of the world. However, it could inhibit you from some of the things you need in life. So, if you are looking for reasons to work at building your score, here are some great benefits of having a good credit score.
1. It improves your chances of getting a mortgage.
Before you can buy a home, mortgage lenders would like to learn you’re not going to default on your mortgage. If you don’t have good credit, the lender will find giving you a mortgage loan as risky.
If a mortgage is approved, your credit rating will affect your interest rate. Interest rates affect your monthly mortgage payment directly, either by increasing or reducing the amount paid to you.
Low credit scores may result in a loan request being denied or accepted but at a much higher rate.
2. It improves the chances of getting a job.
Not all employers need credit checks, but if you’re in finance or a position that requires you to manage money in the business, bad credit can end up damaging your chances of finding a new job.
The concept behind checking credit for certain positions is that if you are unable to handle your own finances, you may also have trouble managing other people’s money. Business doesn’t want to hand over their financial wellbeing to someone who cannot properly manage their own money or stay out of debt.
3. Good credit is expected for business loans
A lot of people have dreams to start their own company. But most start-ups need a substantial amount of cash you may not have at your fingertips.
In that scenario, you’ll need to get a small business loan. You need strong credit to apply for the company loan, among other items. This is mainly due to credibility – if you cannot handle your personal finances well then, the bank will be wary of your capability to handle your businesses finances as well, labelling you as a risky investment.
4. Chances of credit card acceptance are increased
Borrowers with bad credit history usually stop applying for a new credit card or loan, because they have been already turned down.
Getting an excellent credit score does not guarantee approval, as lenders also take into account certain factors such as your income and debt. A decent credit score, however, improves the chances of getting new credit accepted.
In other words, you can confidently apply for a credit card or a loan when you have a good credit score as a high score is a sign to lenders that you can be trusted to manage money.
5. Low-interest rates on credit cards and loans
The interest rate you get when borrowing money is directly related to your credit score. If you have a decent credit score, you will very likely get a great interest rate – plus the finance fees you’ll pay on credit card balances and loans will be low.
The less interest-bearing money you pay, the sooner you can pay off the debt and the more funds you have for other expenses.
Lower car insurance rates
Besides higher interest rates on loans and credit cards, poor credit will cost you in other ways. It can impact the insurance premiums as well, and cost you hundreds more than if you had a decent credit score.
This can make the cost of ensuring your car much lower than someone with a bad credit score.
It is important that you are taking active steps top to maintain your credit score. With any luck, the advice in this article has helped you take that on board and take active steps to improve your credit score.