There are many reasons why you want to make sure your credit score is as high as possible; it’s not just to ensure you can qualify for a credit card or mortgage. Take a look below at 10 little-known benefits of better credit scores that you’ll want to learn right now.
1. Moving Violations Don’t Hurt Your Credit Score as Much
It’s unfortunate, but a moving violation can cause your insurance premiums to go up. The amount of the increase ranges depending on the situation. Your risk level is also taken into consideration. A big part of this is your auto insurance score, which is almost the same as your basic FICO score.
So, you’ll find yourself in a much better situation after a moving violation if you have good credit. In fact, the amount your premiums could go up may be as much as $1,000 a month after a single violation. Yet, if your credit-based insurance score is strong enough, you might only see a smaller increase of $100 to $150 per month.
2. You Can Negotiate With Insurance Providers
Companies that offer auto and homeowner insurance typically use the credit-based insurance score to determine your risk level. If your score is strong, it’s possible to negotiate a better insurance premium.
Additionally, if you can prove your risk level isn’t as high as it seems, you may be able to improve your credit score, and your current insurer may reduce your premiums. If you are rejected, it doesn’t hurt to check whether other insurance companies are willing to offer more competitive rates.
3. Renting a Home Gets Less Difficult
A typical tenant screening process involves a credit check. The landlord or property manager might not care if your credit isn’t good. However, there are many that will use this as a quick way to deny your approval. Someone renting out a place is likely to see your good credit score as proof of your financial stability. Therefore, if you have excellent credit, you’ll get priority dibs for the rental properties you can afford.
4. Reward Cards Become a Lot More Rewarding
You can qualify for any reward credit card when you have excellent credit. This gives you the opportunity to earn cashback rewards on all the shopping you do. The best reward cards sometimes pay as much as 3 to 5 percent back on all your purchases. In the end, you could save thousands of dollars every year by taking advantage of rewards programs.
5. Signup Bonuses Get Better
It’s important to inspect all terms before you apply for a credit card. Picking one just for the signup bonus isn’t a good idea. However, sometimes having excellent credit can gain you access to incredible signup rewards. There are travel reward credit cards that pay especially well. In fact, some signup bonuses can be worth $1,000 or more.
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6. Better Credit Score = Tier 1 Borrower
Many banks and lenders categorize borrowers by tier level. There are three tiers, which essentially put a borrower into one of three borrowing statuses. You’ll either be ranked as “Good”, “Better”, or “Best,” depending on your FICO score.
The cutoff depends on the company reviewing your file. Sometimes, you’ll need at least a 750 score, but on other occasions, you might require at least an 800 score. So, having as high of a credit rating as possible will ensure lenders consider you as a top tier borrower. This will result in optimal interest rates and a higher chance of approval.
7. Starting a Business Is Less of a Struggle
Most small businesses require a bit of startup capital. Without it, you have a much higher chance of experiencing failure. This is because there are many startup costs and scaling expenses you can face along the way.
Also, if your personal credit is excellent, your business creditworthiness will be sky high. This could mean that you can borrow as much as you need instead of getting capped at a few thousand dollars. If you like, all your monthly expenses and sudden purchases can go under one business card, as well.
8. Skipping the Paperwork
You are pre-approved for many credit opportunities. This ensures less paperwork when you do want a new credit card or loan of any sort. You also get to enjoy shorter wait times when you apply for new credit.
9. Qualifying for Unique Financing Options
There are certain types of financing that are not available to the average borrower. For example, you need to have excellent credit to qualify for a vacation home rental unless you make a a sizable down payment.
10. Real Estate Investments Become Trivial
Now, you have easy entry into the real estate market. You can qualify for mortgages with little down. Your interest rate is super low, so your holding costs are kept to a minimum. Sometimes, you can even get into a great deal without making a down-payment. Then, it’s just a matter of getting renovations done, which you might be able to get cheap financing on, as well.
Increasing your credit score will do you and your family good. The key is to not use your financial strength for impulsive spending or unnecessary expenses. Heed this advice, and you can enjoy the financial gain behind your excellent credit status.