A poor credit score can make all of this considerably more expensive — potentially tens of thousands of dollars over the course of a lifetime. (We even made a calculator so you can see just how much you’re losing to bad credit.)
And if your credit is bad enough, it can nearly limit your access to financing or even whether you land a new job. In those cases, it can become a source of serious stress, making you feel like you just can’t leave the past behind and move on. Luckily, there are a lot of things you can do to build good credit and reap the rewards that come along with it.
Here are some benefits that can come from having a good credit score.
1. Lower Interest Rates
If you have a good credit score, you’ll almost always qualify for the best interest rate for credit cards, mortgages, car loans and so on.
Let’s look at a conventional mortgage loan as an example, where a borrower’s credit score is the biggest driver of cost.
If you’re buying a $300,000 house with a 30-year fixed mortgage and have good credit, you could end up paying more than $90,000 less for that house over the life of the loan than if you had bad credit.
If your credit score has gone up since you applied for your credit card and you have a good payment history with your issuer, you may qualify for a lower annual percentage rate simply by calling and asking. (You can check your two free credit scores, updated monthly, on Credit.com.)
And if the first customer service rep you speak to isn’t willing to lower your interest rate, don’t be shy about calling and asking again. Another rep may be willing to cut you a deal.
2. Higher Credit Limits
Again, if you’ve been a customer in good standing for a few months or years and have made your payments on time, you may be able to raise your credit limit. Even if you don’t plan to use the extra credit, the more credit you have available, the better your credit score will be because your ratio of debt to available credit is a big factor.
3. Better Chance for Credit Approval
If your credit score is solid (five key things impact it), you’re more likely to be approved for a new credit card or loan. Having an excellent credit score doesn’t necessarily guarantee approval because lenders still consider other factors, like a steady income.
4. More Negotiating Power
Let’s say you’ve had a credit card for a few years. When you first signed up, you had mediocre credit. Now, you have much better credit, a low balance and you’ve made on-time payments for years.
The credit card company probably won’t just hand you an interest rate reduction on a silver platter. But you can ask. And chances are, if you mention you found a better interest rate deal elsewhere, the company will reduce your interest rate to keep your business.
5. Easier Rental Approvals
We’ve all heard about the importance of your credit scores when it comes to buying a home. But credit is important for renting as well.
Some landlords won’t rent to people with low credit scores. This doesn’t mean you can’t rent a home or apartment, though. There are some ways to get around this and prove to a potential landlord that you can afford the home and will make payments on time.
To find out the rest of the perks of having a better credit score, click over to Credit.com.