Benefits of Having a Good Credit Score
Why you should have a good credit score
In today's world, good credit is used for more than just getting a credit card or loan. Lately, many businesses have become reluctant about offering products and services to those with bad credit. Here are five reasons why having good credit is important in 2019.
Where You Live
Without good credit, many lenders will consider it risky to offer you a mortgage loan, and if they do offer you one, the interest you will pay on that loan could be astronomical. Even worse, if your application is turned down, a negative hard inquiry will be added to your credit reports. Maybe you're not looking to buy a house right now and therefore think this doesn't apply to you. Well, that's the furthest thing from the truth. Many landlords use your credit to decide whether they should rent to you. A lease is considered a loan, and the landlord needs to make sure you'll pay back this loan.
What You Drive
Many don't have the means to pay cash for a car, so people tend to finance vehicles. With bad credit, you may only qualify for a loan with a high interest rate. Here's an example of how good credit benefits you. Jim has a good credit score and wants to finance a $23,000 car over the course of 66 months, with 1.99 percent interest rate. Jim will pay $368.22 a month, resulting in a final total of $24,302.39. Now Rita is looking to purchase the same vehicle but has a bad credit score and only qualifies for a loan with a 14.99 percent interest rate. This results with Rita paying $513.97 a month, with her final total being $33,921.44. Rita has just paid almost $10,000 more for the exact same car. Rita may also be susceptible to a chargeback. What is a chargeback? It is a refund initiated by the bank.
Many employers now conduct credit checks when evaluating potential hires. If there are many dings on your credit, an employer may be hesitant to hire or even promote you due to lack of financial responsibility. Many often miss out on dream jobs due to this. There is much debate about this in 2019 with some states passing laws to do away with this practice, but at the moment it is still very common.
Being Your Own Boss
Entrepreneurship is a dream of many because, honestly, who wants to report to a boss forever? The problem is that many business startups require a good chunk of cash to start, and in that case, a small business loan is typically required. However, you need to have good credit to qualify for these types of loans. Banks are hesitant to lend to a business owner who can't even keep his or her personal house in order.
Your Monthly Bills
Did you know that your credit is needed to establish utility service? Even though you cannot physically store cable or electric, these companies look at it as they are lending you a month of service. It might not sound fair, but these companies look at your credit history as a prediction of your future behavior.
Good Credit Score
So, what is a good credit score? A good credit score is anything above 700, and anything above 750 is considered excellent. People with good credit usually have at least three years of experience with loans or credit cards, at least $5,000 of available credit and have not been 60 days late in the past two years on any type of loan or credit card payment. And it is good to have good credit, because when you go to get a new loan or line of credit, that basically determines if you're going to be approved, as well as the rates and interest that you'll pay. It also affects things like your job prospects, your apartment options and even your insurance premiums.
So if you already have good credit, congrats! Obviously, you can see how important good credit is.