Credit can impact many areas of your life. It can affect where you live, the amount of money you can borrow, and even how employers view your job application. Continue reading to learn more about the benefits of good credit and how you can improve your credit.
What is a good credit score?
The source of a credit score and the person who is judging it will determine how good your credit score is. There are multiple scoring companies so you may have more than one credit score. According to the Consumer Financial Protection Bureau (CFPB), “Based on your credit reports, you will be given a credit score by the credit-reporting companies. You don’t just have one credit score-each company does their own.”
The five levels of credit scores are poor, fair, good, very good & exceptional. FICO, which is a credit-scoring company says that scores between 670 to 739, is considered good. Scores between 661 to 780 are considered good for VantageScore, another credit scoring company.
It may also help to know that credit scores are based on information in your credit reports. Credit-scoring companies like VantageScore and FICO use complex formulas known as scoring models to calculate scores.
Here is how FICO and VantageScore define credit score ranges:
What are the benefits of having a good credit score?
Good credit can bring you many benefits, including lower interest rates on credit cards and lower premiums for car insurance.
Credit scores are calculated based on the information in your credit reports. A higher score can indicate healthy credit, which can lead to the following benefits.
Car Insurance at Lower Rates
When you apply for coverage, some insurance companies might use your credit score to make decisions.
The CFPB states that insurance companies can use credit reports to determine whether or not to approve your application. Once you become a customer, they might continue to check your credit to determine if they should raise your premiums or deny you the opportunity to renew your policy.
Qualify for Lower Credit Card Interest Rates
When you apply for a credit card, the card issuer will likely check your credit. If you’re approved, a good credit score may make you eligible for things like a lower annual percentage rate (APR).
What is an APR? It is the cost of borrowing money. This is called the annual percentage rate (APR). “The CFPB also says that good credit may be helpful when it comes to determining your APR since credit card companies typically offer their best rates to customers who have the highest credit scores.”
Get Approved for Higher Credit Limits
Good credit may also help you get a higher credit limit on credit cards.
Good credit can also help you obtain larger loans from banks. A good credit score can show lenders that you are a good credit risk which can result in the lender lending you more money.
Find More Housing Options
Your quality of life can be affected by where you live. This is where good credit can be helpful. That’s because landlords may check your credit history when you apply to rent an apartment.
Good credit may also help you get a mortgage for a house and a lower interest rate. According to the CFPB, “The better your credit history, the more likely you are to receive a good interest rate on your mortgage loan.”
When you open accounts for utilities such as electricity or internet, your credit might also be taken into consideration. Federal Trade Commission says that “Getting utility services…has a lot to do with your credit history. The better your credit history, the easier it will be for you to get services.”
Good credit may also mean that the utility company may not require a security deposit.
Companies may check your credit history when you apply for a job as a part of your background check. While it’s possible to get a job with less-than-perfect credit, employers might see things like late payments, missed payments and bankruptcies as possible red flags.
We recommend that you check your credit reports before applying for a job. You will be able to spot any errors or missing information by reviewing your credit reports. You can typically get a free annual credit report from the three major credit bureaus, TransUnion®, Equifax® and Experian®. (Through April 2022, you can actually access each report for free once a week.) To get your free reports, go to AnnualCreditReport.com.
Monitor Your Credit On a Regular Basis
Credit can have a huge impact on your life in many ways. It is important to be aware of how your credit affects your life. Monitoring your credit can give you a complete picture of your financial health.
There are also multiple companies that you can pay for credit monitoring services such as Identity IQ. Credit monitoring will allow you to review your credit report on a regular basis to track any updates, changes or errors. Credit monitoring is important because it allows you to receive notifications when your credit has been compromised without you having to monitor it yourself 24/7.
How to Improve Your Credit
You now know the importance of credit. If you are looking to improve your credit score the following steps can help you to improve your credit.
- You should check your credit scores frequently
- Know what factors go into a credit score
- You should keep an eye out for any errors in your credit reports
- Pay your credit card bills on time & in full and keep your credit card balances down
If poor credit is impacting your ability to achieve financial success, consider learning more about the credit repair process. Lifeguard Credit Solutions has helped consumers improve their understanding of their credit score while distinguishing itself as a leader in the credit repair industry. If poor credit is inhibiting your ability to pay off loans or stands in the way of financial goals contact us today!