Seven Benefits of a Good Credit Score

Highlights:

• Credit scores affect more than just your likelihood of being accepted for a loan.
• Utility and credit card companies consider credit scores when offering terms.
• Landlords may consider a prospective tenant's credit score when deciding rental terms.
• Having a good credit score can save you a lot of money in the long term.

A good credit score has many benefits beyond lower interest rates, including potentially better housing options, and access to credit cards that include perks and rewards. Here's a summary of some of the benefits of a good credit score.

1. Lower interest rates on big ticket items mean significant savings. Higher credit scores generally mean lower interest rates on mortgages and car loans. For these big purchases, savings can amount to thousands (or tens of thousands) of dollars over the life of the loan. The lowest interest rates are often saved for consumers with the highest credit scores. Consumers applying for a mortgage could potentially save up to 1% in interest on a mortgage loan. This could translate into saving at least $200 per month over the lifetime of a 30 year mortgage on a $300,000 house.
2. Improved likelihood of qualifying for credit. It can be a real hardship if you are denied financing for something you need. Lenders commonly use credit score “cut-offs” to screen for credit eligibility. As your credit score improves, so may your access to lending products and services.
3. Improve your likelihood of renting a home. Landlords and property management companies may check your credit scores to determine your likelihood of paying rent on time. A poor credit score may mean a higher security deposit, a shorter lease term, a co-signer on the lease requirement, or result in a denial of your rental application altogether.
4. Lower Insurance Rates. In some states, auto insurance companies typically use specialized credit-based insurance scores to help determine your insurance rates. Better credit scores may help you qualify for lower auto insurance premiums.
5. Better credit card rewards & limits. Credit card issuers use credit score cut-offs to help determine which cards you may qualify for. Good credit may help you qualify for lower credit card interest rates, cash back rewards, higher credit limits, and other perks. Many of the most generous reward cards require excellent credit for approval.
6. Favorable Terms for Telecommunications and Utilities. Good credit scores can help you qualify for financing and secure favorable terms for a new cell phone. With good credit, utility providers are more likely to turn on your utilities without a significant security deposit or a letter of guarantee in which someone agrees to pay your bill if you don't.
7. Loan Term Negotiating Power. You can use good credit scores to negotiate the best loan terms. If you prequalify with multiple mortgage lenders, for example, lenders may lower your interest rate or waive loan fees in order to win your business.

Maintaining good credit scores unlocks many opportunities and can help you save money on interest rates, better offers and terms on credit cards, mortgages and utilities.