10 Benefits Of Having A Good Credit Score

Rarely a week goes by that I don’t use — or at the very least check — my credit score. That three-digit number holds a lot of power, after all, and building it up to the best possible score can take years of effort.

Whether you are working to fix your credit, create a brand new credit history, or just improve upon the score you already have, here are some of the biggest benefits of good credit scores.

• Why is it important to have a good credit score?
• Benefits of a good credit score
• Benefits of a good credit score FAQs

Why is it important to have a good credit score?

Consumers actually have many credit scores (not just one!) based on which credit scoring model is used to calculate the number. Whether we’re talking about a FICO Score, VantageScore, or some other scoring model, though, the fact is that it’s important to have a good credit score.

Now, a “good” score can be defined in a few different ways. For example, you might consider an average or above-average credit score to be pretty darn good. Well, according to Experian, that would be any score above 714. If you ask Equifax, however, the average American actually has a score of 698.

You might also mean “good” in the categorical sense. That’s because many scoring models have credit rating categories, one of which is called “Good.” With the FICO scoring model, for instance, a “Good” score is one that falls between 670 and 739.

Regardless of exactly how you define a good credit score, there’s little debate that it’s important to earn and maintain one. The perceived creditworthiness that comes with a good credit rating and clean credit report can unlock many financial doors, making it easier for you to get the products and services you need most while offering a slew of benefits along the way.

Benefits of a good credit score

Whether you already have an average (or higher) credit score or are looking to increase your credit score to earn a Good rating, here are some of the biggest benefits you’ll enjoy.

Greater approval odds

Almost any time you’re applying for a loan, line of credit, or credit card, the potential lender will want to check your credit score and view your credit history. A good credit score shows them that you are a less risky borrower; based on your history, they figure you’ll probably continue paying your bills on time and satisfying your debts as agreed.

Because of this, lenders will be more likely to approve you for the products and services you request, once you’ve shown that you have a strong history of creditworthiness.

Lower interest rates

The better your credit score, the more attractive a borrower you are to lenders. And the more attractive your credit score, the lower the interest rates you’ll be offered on your next loan or credit card.

Most financial products are offered to consumers with an interest rate range. The better your credit score and history, the lower you can expect your interest rate to be. (You may even be able to snag 0% interest on some loans!) This will save you money over the course of your repayment term.

Better loan terms

Speaking of repayment terms, you’ll usually be offered better loan options when you have good credit. Want to pay off your auto loan in 12 months? No problem. Prefer to stretch that personal loan out over 84 months? Sure thing! At the very least, you may be able to lock in a longer loan term while also keeping a competitive interest rate.

Better credit means that more competitive loan terms will generally be available to you.

More rewards and perks

You’ve probably seen advertisements for credit card rewards programs, introductory bonuses, 0% APR offers, and cashback offers. If you’re looking for financial products and services that pay for themselves (or even put more money in your pocket), these are what you should be eyeing.

The most lucrative programs and offers tend to be reserved for borrowers with high credit scores, though. One of the best credit cards for travel (in my opinion) requires a minimum FICO credit score of 720, for instance, while its biggest competitor tends to approve applicants with 700+ scores.

The higher your credit score, the higher the likelihood that you can qualify for one of these products and begin reaping the benefits.

More options on certain products

When the time comes to buy a home, purchase a car, or finance some other large purchase, you may find that your good credit gives you access to additional options and configurations.

For example, an excellent credit score could enable you to buy a home with a lower down payment requirement. This means that you might be able to buy a home sooner and could purchase the property without handing over too much of your available savings.

Better housing opportunities

Many landlords, property management companies, and apartment complexes will run both a background check and credit check on potential tenants. If you have a history of unpaid bills, carry around too much debt, or haven’t responsibly managed your accounts in recent years, you might find that your application gets passed over in favor of a more creditworthy person.

Maintaining good credit can quite literally open doors for you the next time you’re looking to rent a property.

Lower rates on insurance

You might be surprised to learn that many auto insurance companies will also check your credit when you’re applying for a new policy.

Wondering what your credit score has to do with your abilities behind the wheel? Well, insurance carriers may assume that an applicant who’s irresponsible with their credit may also take unnecessary risks on the road. A creditworthy applicant who pays their bills on time and fulfills their financial obligations, on the other hand, may be more likely to obey the rules of the road and behave responsibly.

Better employment opportunities

One more surprise credit check could crop up the next time you’re applying for a job. That’s right: potential employers can run a credit check and/or background check on you before offering you a position.

If they find that you’ve mismanaged your own finances, they may be less willing to put you in a position where you could mismanage company funds. And if the job would involve trade secrets or classified information, an employee who is drowning in debt could be seen as a potential liability or weak link.

Power to negotiate

A good credit score can not only net you great financial offers, it can also give you the opportunity to build your own terms.

Walking into a car dealership with a solid loan pre approval offer — or simply the knowledge that you’ll definitely be approved for a new loan — gives you the power to create a deal that works best for you. If you have bad credit, however, you may be at the mercy of whatever lender your dealership can scrounge up, even if that means awful loan terms.

A better chance at romance

When you think of your credit score, you probably don’t think about your love life. Maybe you should, though.

Recent studies have shown that credit scores do indeed play a role in dating decisions for the majority of both men and women. In fact, responsible money management skills rank just as high as looks for many singles.

If you’re looking to find long-term love, consider whether a good credit score can help boost your allure.

Summary of our guide to benefits of a good credit score

A good credit score is defined differently, depending on who you ask and what exactly “good” means to you. In general, though, good credit involves a score that is average or above.

Building and maintaining good credit can take years to accomplish (or in some cases, might even require the help of credit repair companies), but it’s well worth the effort in the end for most consumers. A healthy score often means low interest rates, better terms, and more benefits and perks. You’ll also have greater odds of getting approved for jobs, housing, and more.