Making the most of your good credit score
Achieving and maintaining a good credit score doesn’t happen by accident. It takes a responsible, long-term approach to managing your money and consistently paying bills on time.
The more you demonstrate to creditors that you pay your obligations as scheduled, the higher your score will climb. Conversely, if you miss payments or default on loans, your score will plummet.
Credit scores range from 300 to 850 and provide general guidelines to lenders, credit card companies and others, allowing them to predict a borrower’s likelihood of repaying debts. A score under 550 is consider bad, while anything above 750 is regarded as excellent, with scores in between classified from poor (550-649) to fair (650-699) to good (700-750).
A credit score is an important indicator to financial institutions that are deciding whether to lend to you. But there are other factors such as savings, investments and other assets that come into being deemed credit-worthy.
Why does a good credit score matter?
If you have a credit score that is considered bad or poor, getting a home or car loan, or even a very low-limit credit card is difficult, at best. If you are approved for credit despite the bad or poor rating, you will probably be paying the highest interest rates because you are considered a risk. Credit card applicants with a bad rating very likely will have to get a pre-paid credit card, which isn’t really credit at all.
Having a strong track record of borrowing and repayment that results in an excellent score means you can more easily secure just about any type of loan at a lender’s best rates. Lenders will compete for your business and you may have the ability to negotiate even better terms. You can also score deals on credit cards that provide all kinds of rewards from lower interest rates and cash-back offers to special deals on merchandise and travel.
How credit scores can impact your life
Beyond affecting your ability to borrow, a credit score can impact many other areas of an individual’s life.
- Property rental companies run credit checks to determine the probability of prospective tenants paying their rent.
- Some auto insurance companies run credit reports on their customers and offer better rates to those with higher credit scores.
- Employers are increasingly looking to credit reports to help determine if prospective employees are responsible and conscientious.
Ways to improve your credit score
First and foremost, pay your bills on time and repay your credit facilities in full. It’s that simple. Obtaining and using credit responsibly, and repeating the pattern across all aspects of borrowing will result in a good or excellent rating that will allow you to avail yourself of the noted benefits and other opportunities.
If you have bad or poor credit, break the habits that placed you in your current situation immediately. Take time to become better educated on ways to improve your financial health, boost your confidence in managing money and increase your credit rating along the way.