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 boost your credit if you continue to make payments when they’re due.
2. Improve chances of landing an apartment
Much like a potential lender, a landlord will want to determine your financial trustworthiness by taking a look at your credit score. This gives him or her better insight into how likely it is that you’re going to pay your rent on time every month. If that three-digit number is too low for a landlord’s liking, getting that dream apartment may be difficult. Even if you’re able to get an apartment with a bad credit score, your landlord may charge a higher security deposit or request a co-signer on the lease.
3. Receive better car insurance rates
In order to predict potential losses on customers, some car insurance companies factor in credit 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 are unlikely to see affordable premiums if your credit score is too low.
4. 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 so-called letter of guarantee, in which a friend or family member agrees to pay your bill if you fail to.
5. 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; they may worry that these financial struggles will distract you from the demands of the job.
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 credit card bills in full and on time is a great place to start, and will set you up for success as you apply for jobs, apartments and insurance coverage.
Couple renting an apartment image via Shutterstock.