I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.
See all posts Frank Gogol6 Advantages of Good Credit
Updated on March 12, 2024
Written by
Written by
Reviewed by
Rohit Mittal
Reviewed by
Rohit Mittal
Rohit Mittal is the co-founder and CEO of Stilt. Rohit has extensive experience in credit risk analytics and data science. He spent years building credit risk and fraud models for top U.S. banks. In his current role, he defines the overall business strategy, leads debt and capital fundraising efforts, leads product development, and leads other customer-related aspects for the company. Stilt is backed by Y Combinator and has raised a total of $275M in debt and equity funding to date.
See all posts Rohit MittalHaving a good credit score is the talk of the town. Apparently, there are so many advantages to be gained from improving your credit score. But what are they exactly?
Wonder no more. Below we look at the 6 advantages of good credit and explain who improving your credit score can benefit you!
What is a Credit Score?
Your credit score is a number, usually between 300 and 850, allocated to you by a credit bureau or credit agency. Your credit score and credit report show lenders how well you manage your financial responsibilities over a period of time. Lenders also use this score to predict how likely you are to repay money borrowed from them. Basically, your credit score tells lenders how much of a risk it is to lend you money and how likely you are to repay a loan.
Your credit score is based on the information on your credit report. Your credit report, in turn, contains the information reported to credit bureaus from financial institutions such as your existing lenders.
The ultimate purpose of your credit score is to be a reliable, objective way for lenders to assess your creditworthiness.
Why Are Credit Scores Important?
As we explained above, lenders use your credit score to assess your risk. But it’s not only lenders that use this information. As you will see below, even potential landlords and insurers use your credit score when they assess your profile.
Let’s take a look at precisely what the 6 advantages of good credit are.
What Are the Advantages of a Good Credit Score?
The advantages and long term benefits of having a good credit score aren’t only limited to the 6 factors we look at below. However, these 6 factors are some of the most significant benefits you can get if you have healthy credit.
So here are the 6 advantages of good credit.
1. Renting Becomes Easier
Landlords also want to know how creditworthy a potential tenant is and how likely they are to pay their rent every month on time. Looking at your credit score will give them a good idea.
To qualify to rent an apartment, you often need a credit score of 620. A score of 620 falls in the “fair credit” range on the FICO and VantageScore rating scales. Even though 620 is the average, some landlords and rental agencies will require an even higher credit score to qualify.
Under the FICO scoring model, a good credit score falls between 670 and 739. Under the VantageScore scoring model, a good credit score will fall between 661 and 780.
Having a credit score of 700 or higher will make applying to rent an apartment easier. Not only will a landlord not merely deny your application, but you will certainly stand out to any potential landlord. If you have a decent credit score, it signals to the landlord you are trustworthy, and you will likely make your monthly payments. As a result, they will probably also not require a cosigner for your lease. It can even bring down the size of the security deposit you are required to pay.
2. Better Rates on Homeowner’s Insurance
Many states in the U.S. allow credit-based insurance scoring. Using this scoring, insurance companies assess your risk based on how well you’ve handled your financial obligations in the past.
Although this isn’t the only factor insurers will use to assess your risk, it does play a big part. Consequently, if you have a good credit score and an insurer assesses your risk as low, you’ll get a better rate on your homeowner’s insurance. It can even lower your premiums by as much as 50%.
Don’t worry, however. An insurer can’t penalize you for having a bad credit score or raise your premiums as a result. They can also not deny you coverage or cancel your policy. Having a good score will simply count in your favor.
3. Taking Out a Loan is Cheaper
Having a good credit score will almost always score you a lower interest rate on pretty much any loan you will ever need. Whether you need credit to remodel your house, buy a car, or even start a business.
Getting a lower interest rate makes the cost of borrowing money lower. You’ll have to repay less over the long run. It will also give you lower monthly repayments.
4. Access to Better Credit Cards
Did you know some credit cards are better than others? It’s not only the interest rate you should be thinking about when assessing credit cards (although it is a big factor to consider). You should also take a look at the rewards and cash backs offered by the different credit cards.
Having a good credit score could mean you qualify for a better credit card that offers you all-around better benefits in the long run! Not only could this help you save money, but these perks will ensure you keep using your credit card, which will, in turn, keep on building your credit score. Provided you make timely repayments, of course.
5. Favorable Terms on a New Cell Phone
Often to afford a new cellphone, you need to finance it. Just like any other credit or financing agreement, having a good credit score will help you secure better terms on your financing deal.
For example, if you can secure a finance deal where you pay 0% interest on a new iPhone 11, you could pay less than $30 a month for 24 months. If you don’t have a good credit score, you will probably have to buy the full price of an iPhone upfront (about $700) or pay a super high-interest rate.
6. Better Car Insurance Rates
Similar to your home owner’s insurance, your credit-based insurance scoring can also work in your favor when it comes to getting better car insurance rates. Your insurance provider will be able to see your risk is low and could offer you lower premiums as a result!
Conclusion
Improving your credit score has massive advantages. These 6 advantages of good credit are only the start. Once you’ve improved your credit score, you will see how much easier it is to get finance, get great credit card deals, and even secure your dream apartment. What are you waiting for? Get working on that credit score today!
Frank Gogol
I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.