Get Approved For Credit Card Higher Limits
While a good credit score can increase your chances of being approved for a credit card or loan, the benefits dont stop there. A good credit score can also help you get approved for higher credit limits, larger loans, and perks.
Banks reward borrowers with good credit scores by allowing them access to more funds, again, because the bank feels confident that those borrowers will repay their debts. Moreover, banks will offer better perksincluding cash-back programs, lower interest rates, or reward pointsto borrowers with good credit.
These benefits are a win-win for the bank and the borrower, too While the bank will make a profit off of the interest you accrue and payback, you will reap the benefits from the various perks and your credit score will improve from on-time payments.
Living Expenses Can Require Good Credit
It might be somewhat shocking to learn that your credit is needed to establish utility services. Electric companies contend that youre borrowing one month of electric service. Before turning on your electricity, the company will check to see if you have good credit. Most utility services conduct credit checks, including cable, telephone, water, even cell phone service providers.
You’ll Get The Best Rates On Car And Homeowners Insurance
According to McClary, having a good credit score can help you save money on your car and/or homeowners insurance.
Most U.S. states allow , where insurance companies assess your risk based on how well you handle your money.
A variety of other factors go into evaluating your rates, and insurance companies don’t rely solely on your credit score in the underwriting process. They cannot penalize you for a bad score by raising premiums, denying coverage or canceling your policy.
But according to the insurance company Nationwide, credit-based scoring results in the most fair assessment of a driver’s risk and the company reports that it actually lowers premiums for about half of its customers.
Getting a free quote from an insurance carrier is the most accurate way to see whether your credit score might bring you savings. You can also view your credit-based insurance score through LexisNexis.
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Get Approved For Higher Limits
Your borrowing capacity is based on your income and your credit score. One of the benefits of having a good credit score is that banks are willing to let you borrow more money because youve demonstrated that you pay back what you borrow on time. You may still get approved for some loans with a bad credit score, but the amount will be more limited.
What Does Insufficient Credit History Mean How To Improve Yours
Have you been excited to add a new to your financial arsenalor apply for a car loan or apartmentonly to be told you have an insufficient credit history? Dont worry! This is perfectly normal, especially when youre young. We all start out with insufficient credit experience until we take steps to establish some.
Lets look at what insufficient credit history means, why establishing credit is important, and how to improve your limited credit history.
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Benefit #: Easier To Buy A Home Or Car
Good credit can help you buy a house with a good mortgage rate or a car with low financing. Borrowing money to own a home or vehicle may come at a price that includes principal and interest. Consumers with good credit may qualify for 0% annual percentage rate loans for a car, where no APR means no interest or finance charges. Establishing good credit may also improve your likelihood of obtaining a low-APR mortgage, which translates to lower debt repayment obligations.
Automotive consumers had an average credit score of 732 for new vehicle purchases and 665 for used vehicle purchases in the second quarter of 2021, according to Experians quarterly report for that period of April through June. This shows the average automotive consumer boasted good credit within the prime category of low risk.
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How Is My Credit Score Calculated
More than 70 companies, banks and lending institutions provide data to Al Etihad Credit Bureau on a daily basis.
The AECB has been calculating credit scores for 4.5 million people and 200,000 companies since 2014.
The factors considered to calculate your are whether you pay bills on time, the number of loan and credit card applications you have submitted and your use of available credit.
Lower Rates On Car Insurance
The benefits of having a high credit score also means you’ll get better rates on car insurance. While auto insurance companies cannot refuse coverage because of your credit history, they can charge you more if your credit history isnât in good standing.
Car insurance companies take several factors into consideration when they calculate premiums, and credit history is one of those factors. If your credit history is poor, it indicates that you irresponsibly manage your financial obligations, which may also indicate that you are an irresponsible driver. As a result, insurance companies will assume you present a higher risk and will charge a higher premium. A healthy credit history means that you manage your finances responsibly and youâre more likely to be a responsible driver. As a result, auto insurance companies will consider you less of a risk if your credit is good, and your premiums will be lower.
Become An Authorized User With Someone Elses Card
Got a trusted family member or BFF with a good credit score? They might be able to help you with your insufficient credit history by adding you as an authorized user with one of their credit cards. Your name and SSN will then be attached to that account, so you can share a bit of their good credit history.
The credit card issuer will send a copy of the card with the authorized users name on it. You can use it, but be wise and protect your relationships. Ultimately, the primary cardholder is still responsible for any charges made with cards connected to their account.
That said, the authorized user doesnt even have to use the card in order to benefit from it! This is the beauty of ittheres no financial stress or risk to either party involved.
I added my brother to one of my card accounts when he was looking to establish credit. When his card arrived, we just tossed it in a drawer and he never used it. Drawer or no drawer, it helped his credit just by being attached to my account.
If you become an authorized user, you can work out your own terms with your friend or family member. Maybe you need a credit card to pay a certain bill every month, so you use the authorized user card and then reimburse them with cash or a money transfer. Its up to the two of you!
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How Can I Quickly Raise My Credit Score
If your credit score isn’t as high as you’d like it to be, you have options for improving your credit. In fact, making a few smart financial moves could help improve your credit scores quickly. The moves that rank highest when it comes to affecting your credit include:
- Repaying debt: The credit utilization ratio is one of the key determining factors in your score and a major factor to focus on when it comes to credit repair. It’s determined based on the amount of available credit used. If you repay some of your debt, you’ll reduce your ratio because you’ll be using less of your available credit — and your score should go up.
- Becoming an authorized user: When someone adds you as an authorized user to a credit card with a long, positive payment history, the credit card history shows up on your credit report and improves your own credit record.
- Using Experian Boost: Credible’s marketing partner, Experian, offers a tool called Experian Boost that allows you to connect your bank accounts to your credit record. This enables data on utility payments and payments to streaming services to be considered in determining your credit score. It can increase your score if you don’t have a long history of positive credit payments.
Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at and your question might be answered by Credible in our Money Expert column.
Why Is A Good Credit Important
Here are 9 reasons why having good credit is important:
1. It helps you get approved for loans.
Having good credit can help you get approved for loans such as mortgages and car loans. It can also help you get lower interest rates on loans, which can save you money in the long run.
When you’re credit scores are not the best, you’ll need to get a bad credit home loan which will come with less desirable terms.
2. It affects your ability to secure a mortgage or rent an apartment.
Having good credit is important for many reasons. It can affect your ability to secure a mortgage or rent an apartment.
Good credit also indicates that you are a responsible borrower and can be a valuable asset when looking to rent an apartment or purchase a home.
3. It impacts your ability to get a car loan and student loan.
Having good credit can impact your ability to get a car loan or student loan. For example, if you have poor credit, you may be required to put down more money when you apply for a car loan.
It could also lead to higher interest rates and ultimately a larger debt burden.
Additionally, if you need to borrow money to attend college, having good credit can help you secure a lower interest rate on a student loan.
Conversely, if your credit is poor, it may be harder for you to find an affordable car loan or student loan.4. It can help you get better terms on purchases made with your credit cards
5. It can even give you discounts on goods and services.
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Does Paying Off A Loan Help Or Hurt Credit
Paying off a loan frequently hurts credit because it impacts your credit history and your credit mix. If the loan that you have paid off is your oldest credit line, then the average age of your credit will become newer and your score will drop. If the loan that you pay off is your only loan, then your credit mix suffers.
Good Credit Means More Options To Buy Or Rent
One of the biggest things your credit score will affect is the roof over your head. And thats not just limited to mortgages renters, too, will feel the sting if they have bad credit.
The National Association of Realtors says that the average consumer will buy between three and four homes during a lifetime. The cost of getting started has gone up steadily, so having a good credit score is crucial, no matter whether its your first or fourth home.
The higher your credit score, the better your interest rate for a mortgage.
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Why Having Good Credit Is Important
Lets quickly look at a few of your incentives to improve your insufficient credit history. Having good credit can open a lot of doors for you, whether its:
- Qualifying for a new apartment
- Getting a good rate for a car loan
- Being approved for a mortgage
- Getting credit cards with good rewards
- And more
Ultimately, credit scores in the United States can affect your life in a lot of ways. If you practice smart credit habits from the beginning, youll set yourself up for success from the get-go.
How Much Debt Youre Carrying
Your credit report will also be affected by the level of debt youre carrying. Your credit card balances especially compared with your overall credit limit will impact your final score, for instance, as will the remaining balance on installment accounts such as a personal loan or home mortgage.
The less debt you have overall, the lower your credit utilization, and the more youve paid off on loan balances, the better your chances of having a good credit score.
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Access To The Best Credit Cards
High credit scores will afford you access to the most rewarding credit cards on the market, including those that offer the lowest interest rates and the best rewards, such as cash back offers, travel points, and other incentives. You are also more likely to qualify for an introductory 0% APR purchase and balance transfer offers, which can translate to significant savings over time.
Importance Of Credit Score
A credit score is a three-digit number that shows your creditworthiness. It is the first thing that lenders check when you apply for a loan or a credit card. It gives them the idea of whether you can repay the borrowed sum on time or not. Hence, it is important to maintain a good credit score. You can maintain your credit score by making all your payments on time, checking your credit reports frequently, paying off existing debt on your credit cards and keeping your credit utilization low below 30%.
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What Is A Good Credit Score
What is considered a good credit score? According to the FICO credit scoring model, credit scores fall into five distinct categories:
- Poor credit: 300-579
- Very good credit: 740-799
- Excellent credit: 800-850
The good credit score range includes all FICO credit scores between 670 and 739. However, many people consider good credit to include any FICO score higher than 670. This means that if you have excellent credit or perfect credit, you also have good credit by default.
If your FICO credit score is higher than 670, you not only have good credit but have also moved your credit from the subprime category to the prime category. People with good credit are more likely to benefit from the prime interest ratewhich means that you might pay less interest on your credit cards, mortgages and loans.
Better Risk Means Lower Interest Rates
Aside from having a better shot when applying for loans, you wont have to worry about being charged exuberant amounts of interest with a good credit score.
Poor credit scores can lead to having the loan denied or charged at a much higher rate. Lenders assume a low credit score means its probably harder to settle the credit on time. It brings a higher risk that they need to offset with higher charges.
High credit scores imply that you have settled outstanding credit on time in the past. Thats why youre charged lower interest rates on credit card balances you carry or loans you have.
It doesnt matter if youre looking for a personal loan, mortgage, student loan, or are carrying a balance on your credit card. Your credit score influences the interest rates at most places.
When youre charged with a lower interest rate, you could pay off your debt faster and use the money toward other things.
Why Is It Important To Have A Good Credit Score
Some folks prefer to never carry any form of debt, while others strategically use certain financial products to their advantage. Whichever category you fall into, though, the simple fact is that a good credit score can open many doors throughout your life.
Understanding how to build and then maintain good credit scores can be a bit tricky, though. So whats the magic formula for a healthy credit history, what exactly goes into one, and why is it important to have a good credit score in the first place?
Lets take a look at what makes up a credit score and how you can go about boosting your personal credit rating, regardless of how it will play into your future financial plans.
Better Car Loan Rates
The COVID-19 pandemic hit the auto industry in 2020, but not as badly as initially feared. Total car and light trucks sales were about 14.6 million in the United States in 2020, down 14.6% from the previous year. Thats not ideal, but with plant shutdowns hitting the industry, the decrease from 17.1 million in 2019 could have been worse.
The challenge continues in 2021, as companies are having a hard time obtaining the chips needed to run circuits in cars and trucks. General Motors idled four North America plants for four months this year and has decreased its expected pretax 2021 by between $1.5 and $2 billion. Ford said it could reduce second quarter production by one-half.
That does not mean the price of cars is coming down. Analysts at Kelley Blue Book reported that the estimated price for a light vehicle in the United States was $38,723 in 2020. New vehicle prices jumped $940 year-over-year. Car loan debt totaled $1.37 trillion. That is 9.5% of all consumer debt the average monthly cost is $550.
A strong credit score can help. According to U.S. News and World Report, the interest rate on an auto loan can range from 2.5% for a borrower with a credit score of 700 or more to 6.76% for those between 450 and 599. Thats a difference of thousands of dollars based on the credit score.
Rates are somewhat higher if youre buying a used car, ranging from 2.74% for the best credit scores, to 7.01% for the not-so-good scores.
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