Having a high credit score comes with many benefits. Here are the main ones that you need to know. (iStock)
At its core, your credit score is an indicator of how likely you are to pay your bills. As a result, those with a high credit score often end up having an easier time getting approved for new financial products and they also receive the best interest rates. Generally, any FICO score above 670 is considered a good score.
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Not sure where you fit on the credit score spectrum? Then you should start using a credit monitoring service to track changes to your credit score. Credible can get you set up with a free service today.
If after checking you still need more inspiration to convince you to build your credit, read on below.
What can I do with a good credit score? 5 benefits
Here are five reasons why it's worth getting your score as high as possible.
- Secure a loan with a low interest rate
- Qualify for a refinance
- Lower insurance premiums
- Easier time renting a home
- Credit card rewards
1. Secure a loan with a low interest rate
Truthfully, thanks to the coronavirus pandemic, today's rates are at record lows. However, if you want to qualify for the lowest of low interest rates, you'll have to have an excellent credit score.
To see where you fit in, turn to a credit monitoring service. Credible's partners can help you find your credit score, history, alert you to potential fraud, and more.
Here are some loan types that require good credit.
- Mortgages: If you're thinking of buying a home, you're going to need to get a mortgage and your credit history will play a large role in determining what interest rate you're given on the loan. In order to find the lowest rate possible, your best bet is to shop around. Visit Credible to compare rates and mortgage lenders.
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2. Qualify for a refinance
If you already have an existing loan, but still want to take advantage of the latest rates, you might think about refinancing. Refinancing involves taking out a new loan with better terms and using it to pay off your old loan. Typically, when people talk about refinancing, they're either referencing their mortgage or their student loans.
Mortgage refinancing
At the time of reporting, home loans with fixed interest rates are as low as 2.71% for a 30-year loan, or 2.26% for a 15-year loan, according to Freddie Mac. Meanwhile, loans with variable interest rates are at an average of 3.16% for a 5/1-year ARM.
You can explore your mortgage refinance options by using Credible to compare rates and lenders.
4 WAYS TO GET LOWER HOME MORTGAGE REFINANCE RATES
Student loan refinancing
According to Credible, students with a credit score as low as 650 can refinance their student loans to a variable rate of 2.71% with a co-signer or a fixed rate of 3.70% with a co-signer. However, if you have a credit score of at least 770, you can enjoy variable rates as low as 2.39% or fixed rates as low as 2.79% without anyone else being on the loan.
Use an online tool like Credible to see what rates are available to you and to compare multiple lenders at once.
HOW TO GET THE LOWEST STUDENT LOAN REFINANCE RATE
3. Lower insurance premiums
In addition, having a higher credit score can mean that you pay less for auto and home insurance. In fact, according to a study by InsuranceQuotes.com, drivers with poor credit scores pay up to 91% more for their auto insurance than those with excellent credit scores. A similar study found that having a fair credit score can add up to 29% to your home insurance premium.
With Credible, you can compare home and auto insurance companies, including their rates and fees. See if you're paying more than you have to and if it's worth switching insurance companies.
THIS IS THE BEST WAY TO LOWER YOUR CAR INSURANCE COSTS
4. Easier time renting a home
Often, before a landlord will allow you to sign a lease, they will check your credit report. Since your credit score is an indicator of how likely you are to pay your bills, those with excellent credit are more likely to have their rental applications accepted.
Landlords are required to pay their mortgage whether you pay rent. With that in mind, many landlords weigh a prospective tenant’s credit score heavily because they don't want to worry about having to come up with the funds for the mortgage payment on the fly if a tenant doesn't pay.
5. Credit card rewards
Lastly, people with high credit scores tend to have an easier time taking advantage of credit card rewards. Put simply, if you don't need to have a card with a 0% APR period, you’ll likely qualify for other reward options like cashback or redeemable travel miles.
Online marketplace Credible can help you compare different types of reward cards, including various rates and fees that come with them. Use Credible's free online tools to find the recommended credit card for your needs.
HOW DO REWARDS CREDIT CARDS WORK?
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5 benefits of having a good credit score - Fox Business
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