This post is sponsored by Lexington Law.
I feel like we always talk about fixing bad credit because having good credit is important. But, we never talk about why it’s important and the benefits you get from having a good credit score. So today we’re going to break down what a good credit score is, the benefits of having one, and tips for maintaining your score.
What is a credit score and what’s considered a good one?
The experts at Lexington Law say, “your credit score is a statistical evaluation of the information in your credit reports in an attempt to represent your credit risk using a single 3-digit number. A good credit score indicates to lenders that you are a low credit risk because, based on your credit history, you have been responsible with credit in the past.”
Depending on where you pull your report you might see different ranges but today we’re going to focus on reports that range from 300-850.
A “good score” in this range would be above 670, with a “very good” score in the 740-799 range, and an “exceptional” score in the 800-850.
The higher the score, the better.
I’m in at least the “good” range, what benefits do I have?
Lower interest rates on credit cards and loans
When you take out a loan for a car or home there is interest (additional money you need to pay back on top of what you borrowed). If you have lower credit, you don’t have a lot of choices of companies to go with and could have very high interest rates. With good credit you’ll pay lower interest and lower finance charges on credit card balances and loans.
Higher credit limit
Companies give higher limits to people who are more likely to pay them back. If you’re opening a credit card, your limit will be higher than those with no credit history or poor credit. When I got my first credit card with barely any credit the limit was so small that I almost couldn’t buy my books for a semester in college. Let’s just say, having a card where you can’t really buy anything isn’t that helpful.
Improve your chances of renting an apartment
Landlords are looking at credit scores before you can even sign a lease for an apartment. If you’ve filed bankruptcy or had credit issues in the past, you might get turned down for your dream place because the landlord doesn’t want to take the chance that you won’t pay rent. With good credit, you won’t get stuck with higher deposits, need a co-signer, or spend more time looking for places to live.
Save on your car insurance
According to Consumer reports, a poor credit score could add an average of $1,301 to your yearly car insurance premium. This means that people with “very good” and “excellent” scores are saving a lot money per year for the same service.
Land a job
Many employers, especially in roles where you deal with budgets and accessing financial information, will ask to pull your credit report. They see this as an indication of how responsible you are, your trustworthiness, and dependability. If you have a high score you are more likely to land the job over someone who doesn’t.
No deposit for utility services
When you have lower credit, you’re often asked to put a deposit for utilities which can be around $250 for each company. The company wants to make sure they are paid if you miss a bill. While you might have good credit, you might not have that money lying around especially because you won’t see it until you move again or change companies.
Better negotiating power
If you’re looking to buy a car or are negotiating the interest rate on your credit cards, your high score gives you better leverage. You can reference your offers from other companies and bargain your rates.
Qualify for higher rewards credit cards
Who doesn’t love a good credit card reward from cash back to travel to gift cards? Good credit gives you more options for companies and perks and by using it and paying the balance, you continue to increase your score. Win, win!
How can I maintain a high credit score?
- Review your credit report yearly
- If you see a problem with your credit, speak up
- Pay your bill on time
- Maintain low credit card balances
- Stay in control of all your debt
- Keep old credit cards open
- Limit the amount of new credit cards
- Make payments in full and if you can’t pay at least the minimum
- Consider using a credit monitoring service like Lexington Law
Understanding what a credit score is, the benefits of having at least a “good” score, and making it a point to maintain it is crucial. As adults, we can take ownership of our financial health and have the power to reap the benefits of good credit. I mean, who doesn’t like free money and more perks?
If you want more help increasing and monitoring your score, the experts at Lexington Law have great information on their site and provide a free one-on-one personalized consultation.
She provides training, consulting, and speaking services to organizations all over the world. She has an MEd in Social and Comparative Analysis in Education from the University of Pittsburgh and is a Gallup-Certified Strengths Coach. Her work helps to bridge communication gaps across generations, job functions, and geographies, and she has worked with organizations ranging from non-profits to multi-billion-dollar enterprises. She has delivered a TEDx talk on authentic workplace communication, and has been featured in media outlets including Forbes, ABC, FOX, and CBS. Her book, Humanize Your Workplace (Career Press), is set to release next year.