Credit Scores, Credit Rating, or Credit Standing has an influence on the quality of your life. It may, for example, affect where you live, how much money you may borrow, and how some companies assess your job application.
A good credit rating is determined by where a score is obtained, how it’s calculated, and who is assessing it. There are several credit scoring companies, so you might have multiple credit scores. There are two main credit-scoring companies, FICO® and VantageScore®. For FICO®, if your score ranges between 670 and 739, that would be qualified as good. Meanwhile, the range for a good credit score for VantageScore® is between 661 and 780. Regardless, your credit scores are identified by the information contained in your credit file. If you have a good account history, you will have a good credit rating.
Why start investing in your Credit Scores? The advantages of having good credit might range from reduced credit card interest rates to lower car insurance costs. Below are some of the luxuries you can enjoy by having good credit scores:
1. Low Interest Rates on Credit Cards and Loans
The card issuer is likely to do a credit check when you apply for credit or loans. If you are authorized, a strong credit score may qualify you for benefits such as a lower annual percentage rate (APR). What precisely is an annual percentage rate (APR)? Annual percentage rate (APR) refers to the annual interest earned by the amount borrowed from or paid to investors. The CFPB defines it as the cost of borrowing money. According to the CFPB, having good credit may indeed influence your APR.
2. Better Chance for Credit Card and Loan Approval
Borrowers with a bad credit history usually hesitate applying for a new credit card or loan since they have previously been denied. Having a high credit score does not ensure acceptance because lenders take into account other indicators such as your income and debt. A good credit score, on the other hand, enhances your chances of being authorized for new credit. In other words, you may confidently apply for a loan or credit card.
3. Get a Cell Phone on Contract With No Security Deposit
If you have bad credit, several mobile phone carriers may charge a security deposit or force you to prepay when you create an account. However, if you have good credit, you may be able to avoid those upfront charges.
4. Look Better to Potential Employers
When applying for a job, some employers may run a credit check as part of the background check. While it is possible to acquire a job with less-than-perfect credit, employers may view late payments and bankruptcies as red flags.
5. Have More Housing Options
Credit scores are increasingly being used as part of the tenant screening process by landlords. A low credit score, especially if it is the result of a past eviction or an unpaid rental bill, might seriously jeopardize your prospects of getting into your desired apartment. A strong credit score saves you the time and trouble of looking for a landlord who will accept renters with bad credit.
A good credit score is something to be proud of because of all the benefits, especially if you’ve invested so much in improving your credit score from low to excellent. And if you’ve never had a negative credit score, keep doing what it takes to keep it that way. It just takes a few late payments to get off track.