There’s no way around it: Having good credit is important.
A stellar credit history shows potential lenders that you’re likely to repay loans in full and on time, which can help you lock in better rates on car loans, mortgages and other financial products. What’s more, the advantages of strong credit extend far beyond receiving good rates on loans. Here’s a closer look at the benefits of good credit.
1. Qualify for excellent credit card deals
A strong credit history will help you qualify for the best credit cards, which include low interest rates, rewards and cash back. As well as helping you save money, these perks will encourage you to keep using your credit card — which will help your credit if you continue to make payments when they’re due.
2. Get a new cell phone at favorable terms
Smartphones or cell phone upgrades can be expensive. But a good credit score may allow you to finance one at favorable terms that let you pay little or no interest. For example, you could finance a new iPhone 11 at 0% — paying less than $30 per month for 24 months — if you sign up for a service plan with several major carriers. The full price of the phone is about $700. Without good credit, you'd likely need to buy the phone upfront or pay a higher interest rate if you qualified for financing.
3. Improve your chances of getting an apartment
Much like a potential lender, a landlord will want to check your financial trustworthiness by taking a look at your credit. This gives insight into how likely you are to pay your rent on time every month. If your score is too low or your report has too many negative marks, getting that dream apartment may be difficult. Even if you’re able to get an apartment with bad credit, your landlord may charge a higher security deposit or request a co-signer on the lease.
4. Receive better car insurance rates
In order to predict potential losses on customers, some car insurance companies factor in credit-based scores when determining monthly premiums. The better your credit score, the better your shot of receiving a reasonable deal. You can't be turned down altogether on the basis of credit, but you're unlikely to see affordable premiums if your credit score is too low.
5. Lock in utility services
Before taking you on as a customer, a utility company might look at your credit report to get a sense of your payment history. If your credit history isn’t up to snuff, the utility company may require you to pay a deposit or ask for a letter of guarantee, in which a friend or family member agrees to pay your bill if you fail to.
6. Get a job
Although they have to get your permission beforehand, some employers will request to see your credit report as part of your job application. Red flags like past bankruptcies or frequent late payments may make them reluctant to extend you a job offer.
Because the effects of good credit can be felt in so many parts of your life, it’s important to do what you can to help your credit. Paying your bills on time is a big part of the recipe, as is keeping credit card balances as low as you can.