A bad credit rating can make all of this considerably more expensive – potentially tens of thousands of dollars over a lifetime. (We’ve even created a calculator so you can see how much you’re losing to bad credit.)
And if your credit is bad enough, it can almost limit your access to finance or even if you get a new job. In these cases, it can become a source of serious stress, making you feel like you just can’t put the past behind you and move on. Fortunately, there are plenty of things you can do to build good credit and reap the rewards that come with it.
Here are some benefits that can come from a good credit rating.
1. Lower interest rates
If you have a good credit score, you will almost always qualify for the best interest rate for credit cards, mortgages, car loans, etc.
Consider the example of a conventional mortgage, where a borrower’s credit rating is the primary cost driver.
If you buy a $300,000 home with a 30-year fixed mortgage and you have good credit, you could end up paying over $90,000 less for that home over the life of the loan than if you had bad. credit.
If your credit score has gone up since you applied for your credit card and you have a good payment history with your issuer, you may qualify for a lower annual percentage rate just by calling and asking. (You can check your two free credit scores, updated monthly, at Credit.com.)
And if the first customer service representative you speak to isn’t willing to lower your interest rate, don’t hesitate to call and ask again. Another representative may be willing to work out an agreement for you.
2. Higher credit limits
Again, if you’ve been a customer in good standing for a few months or years and have made your payments on time, you may be able to increase your credit limit. Even if you don’t plan to use The more extra credit you have, the more available credit you have, the better your credit score will be, as your debt to available credit ratio is an important factor.
3. Better Chance of Credit Approval
If your credit score is strong (five key things affect it), you’re more likely to be approved for a new credit card or loan. Having a great credit score doesn’t necessarily guarantee approval, as lenders always consider other factors, such as a stable income.
4. More bargaining power
Let’s say you’ve had a credit card for a few years. When you first signed up, you had poor credit. Now you have much better credit, a low balance, and you’ve been making payments on time for years.
The credit card company probably won’t just give you an interest rate reduction on a silver platter. But you can ask. And chances are that if you mention that you found a better interest rate elsewhere, the company will lower your interest rate to keep your business.
5. Easier rental approvals
We’ve all heard about the importance of your credit scores when it comes to buying a home. But credit is also important for leasing.
Some landlords refuse to rent to people with low credit ratings. This does not mean, however, that you cannot rent a house or an apartment. There are ways to get around this problem and prove to a potential homeowner that you can afford the house and that you will make the payments on time.
To discover the rest of the benefits of having a better credit score, click on Credit.com.
More on Credit.com
