7 Ways to Put Your Good Credit Score to WorkAugust 17, 2020
If you have been paying your bills on time and have achieved a high credit score, congratulations! A high credit score opens up many options that can help in both your financial and personal lives. Now that you have a good credit score, here are seven ways to put it to work for you.
What is a Good Credit Score?
A credit score is a three-digit number that lenders use to determine how much of a risk it is to lend money to that person. There are two major types of credit scores, a FICO credit score and a VantageScore. Lenders can use either score, although a FICO score is used by 90% of the top lenders. A credit score can range from 300 to 850. A good credit score is considered to be in the range of 670 to 739. According to Experian, one of the credit bureaus that calculates scores, the average FICO score in 2019 was 703.
What Can a Good Credit Score Do for You?
When you have a good credit score, there are many benefits you can take advantage of to help improve your finances and that affect your personal life. Here are some examples of how you can put your good score to work for you:
Help Qualify for Credit Cards and Loans
When you apply for credit cards or loans, like student loans, mortgage or car loan, the lender pulls your credit report and score to determine your creditworthiness. A good credit score will help you qualify for credit cards or loans. With a strong credit score, you can qualify for sought-after credit cards that offer rewards and benefits. With a low credit score, you may not even qualify to obtain credit.
Save You Money in Interest
If your credit score allows you to qualify for a credit card or loan, a good credit score can help you qualify for a lower interest rate, thereby saving you money. This can help advance your financial future because if you save money in interest costs you can put those savings towards other financial goals, like retirement or an emergency fund.
Qualify for Housing
A credit score doesn’t just affect you when you are trying to take out a loan, it can also affect your personal life by determining whether you will be approved for rental houses or apartments. Landlords may look at your score to determine whether you may be at risk of not paying rent. A good score makes you more likely to be approved for housing.
Avoid Security Deposits: When you have a good credit score, you can use it to your advantage by not having to pay some security deposits or paying a reduced security deposit. This can come into play with utility companies, like electric and water companies, as well as with cable and internet companies. With a lower credit score, you may have to pay a high security deposit when you are signing up for utilities. A higher credit score leads to more savings!
Help Get a New Cell Phone
If you are looking to get a new cell phone, but won’t be paying for it outright, you may need to lease a phone. Some carriers will require a good credit score to qualify for a lease plan on a new cell phone. Otherwise, you may have to pay the entire cost up front or choose a different phone.
Qualify for Refinancing
If you want to refinance your mortgage or student loans, having a good credit score can help you qualify and obtain a lower interest rate. Refinancing can help decrease your monthly costs, as well as your interest costs over the life of the loan.
More Options from Different Lenders
With a high credit score, you will be able to qualify with many different lenders when you are trying to obtain a loan. Having many different lenders willing to work with you enables you to obtain the lowest interest rate and best terms. With a lower credit score, you may qualify with fewer lenders and would be forced to use lenders that offer less than ideal rates and terms.
How to Improve Your Score
A credit score is determined by information in your credit report, such as your payment history, whether you make late or on-time payments, how much debt you have and how much available credit you have. If your credit score isn’t where you want it to be, here are a few ways to improve it:
Pay your bills on time every month.
A major part of your score is based on the consistency of your payments. If you don’t have a budget, create one to make sure all your payments can be made.
Pay down debt.
The next major factor in determining a credit score is the amount of outstanding debt. Try to pay down your balances to keep the debt amount low.
Do not apply for a lot of credit.
Every time you apply for credit it causes an “inquiry” on your report. All inquiries for the past 12 months are shown. A lot of inquiries can raise a red flag that a person needs credit and would have a difficult time paying it back.
Do not close long-standing accounts that are in good credit.
Some of your score is based on the length of your credit history. A longer credit history can help improve your score.
Having a good credit score can help you in the future, whether with financial aspects or your personal life. If your credit score is negatively affecting you, follow the above steps to improve it. And if you have a high credit score, put it to good use and keep up the good work!