In an economy where most workers are living paycheck to paycheck, is there anything more precious than good credit?
Unfortunately, with over 68 million Americans having bad or poor credit, it’s safe to say good credit isn’t guaranteed to anyone. If you’re among these people, you might be wondering whether taking steps to build your credit is worth it.
Well, the truth is good credit is invaluable. Not sure how?
Keep reading to learn the benefits of having good credit!
#1. Gets You Approved for Low-Interest Loans
As of 2018, Americans held about $120 billion in personal loans – a record.
Clearly, more and more people are relying on personal loans to get by and finance other private activities.
With good credit, you’re not only assured of getting approved for personal loans but also securing them at low rates. Given that the average annual percentage rate for a traditional personal loan ranges from 5% to about 30%, you can confidently secure a loan with about 10%-15% APR. That’s a steal!
On the other hand, having bad credit makes you a risky borrower. Banks will turn down your applications, effectively limiting your borrowing options to informal lenders who offer loans with very high APR. We’re talking annual rates as high as 400%!
#2. Qualify for Higher Credit Limits
Banks and other formal lenders use your credit score to determine your creditworthiness and establish your credit limit.
If you have a good score, chances are you’ll get higher credit limits. This means you can secure credit cards with substantially large amounts.
Although you might not need the entire amount right now, you’ll have greater peace of mind knowing you have the funds at your disposal. Should you get into an emergency that requires lots of money, you’ll simply use the card to settle it.
#3. Get Approved for Rental Houses
America is a nation of homeowners, but an increasing number of people are opting to rent rather than buy.
If you’ve jumped on this trend and are on the hunt for an apartment, you might want to pause and take a look at your credit score. Many landlords routinely perform credit checks on potential tenants and often reject those with bad credit histories.
You see, bad credit tells landlords that you’re probably in financial pressure or you have bad financial habits. As such, you’re likely to default on rent payments.
On the contrary, a good credit score makes you a more attractive tenant.
#4. Get Better Auto Insurance Rates
A number of factors go into your insurance premiums: your age, driving record, make and model of the car, and, you guessed it, your credit score.
Although the extent to which your credit score impacts your premiums varies from provider to provider, a good credit score means you have a good payment record. Your provider will reward you with a better rate.
Enjoy the Benefits of Having Good Credit
Low-interest loans, access to higher credit limits, easier approval for rental houses, and lower car insurance rates are some of the benefits of having good credit.
If you currently have bad credit, these benefits should motivate you to start building it. And if you have good credit, maintain it or you’ll lose the benefits and put your financial life in jeopardy.
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