If you’ve been paying all of your bills in a timely manner and made the necessary steps to ensure your credit score is in good shape by paying down your credit cards balances, this helps creditors view you as more credit-worthy, which is a good thing. As a result, lenders are more likely to lend larger amounts of credit because you are less of a risk than somebody with an average or poor credit score. Having a strong credit score and history can set you up for many perks and low-interest loans and offers in the near future. While we can all survive with a poor or less-than-ideal credit, those extra points will end up saving you money in interest charges over time and also provide more bargaining power.
Below are 6 major benefits of having a good credit rating:
1. Increased credit card limits. Your ability to borrow more can increase exponentially when you prove to creditors that you’re a responsible cardholder, and can use a credit card frequently without overspending. You can request a credit limit increase or the card issuer will just increase your limit automatically by rewarding you for being a good customer. Keep in mind that the ratio of your available credit to used credit also plays a role when calculating your credit score; raising the limit could add a few more points to your already-high credit score.
2. Better mortgage and refinancing rates. Should you be looking to buy a house or property, lenders are far more likely to extend an attractive rate for your home loan when you have a good credit score and credit history. You are viewed as an ideal customer when it comes to applying for a mortgage or refinancing your home; your clean credit score wins you points with the underwriting department and tells the lender you are a responsible borrower. You may also have more negotiating power with fees and closing costs. Because banks are competing for your business, it’s in their best interest to offer the most competitive rate.
3. Lower financing rates on a car lease. If you are in the market for a new car and are thinking of leasing instead of buying, you might be able to use your good credit history to your advantage when negotiating. Some dealers will be happy to offer you lower-than-average financing rates because they can see you as low risk and you are more than likely to repay the loan back on time. A clean credit history tells the story that you are a responsible borrower. If you can’t negotiate a better rate, the dealer might be able to lower the price of your car instead. Don’t forget about your car insurance package when they run the car’s VIN (Vehicle Identification Number) through the registrar and review your insurance policy. A good credit rating may once again get you a better rate.
4. Excellent credit card offers. Many credit card users benefit from a using ‘rewards cards’ where it pays to use the card for everyday purchases in order to accrue points, as long as they pay off the full balance each month. The best types of rewards cards are made available for those with excellent credit, they offer a multitude of perks such as free gifts, cash back offers and low introductory rates. Whilst earning a variety of perks and bonuses is nice, you need to be careful not to overspend or carry a balance on these cards. Just because the perks are attractive, don’t get carried away and remember to stick to the smart spending habits that enabled you to get the card in the first place.
5. Easier holiday home reservations. If you are planning on renting a property for a vacation and using an agency in the process, don’t forget to mention you’re good credit history as a negotiation tool as it may help you get a lower rate. Most rental companies will run a credit check before offering a rate. You could end up saving a decent amount with strong credit.
6. More room to negotiate. Whether you’re applying for a personal or a home loan, having a good credit history could give you more negotiating kudos. You might be able to get a larger credit line, lower interest rates or work out a better repayment plan just because you have a good credit history. Don’t be shy to use your credit score as collateral when negotiating a deal; it assists the lender in making a more qualified decision on the customer, so make it work in your favour as well.