Why Is a Good Credit Score Important?

Your credit score measures your likelihood of paying your bills on time. A good credit score, which is anything above 670, can show off your creditworthiness to lenders. Wondering why you should want to be creditworthy? Well, credit impacts you more than you know!

A bad credit score can affect your ability to rent a place or borrow money. That’s why it’s beneficial to start working on building and restoring your credit as soon as possible.

To learn more about the benefits of a good credit score, continue reading.

The importance of credit

Credit is important because it allows economic transactions to take place. Businesses borrow money to grow and consumers borrow money to purchase!

Credit allows you to make big purchases like cars, houses, or other necessary expenses. If it’s too expensive to pay all at once, then credit makes all the essential goods and services you need accessible.

Credit reporting

When you borrow money, your creditors report to Equifax, Experian, and TransUnion. These three credit bureaus keep track of your credit history in a report which is then used to evaluate your credit score.

Your credit history showcases how you’ve managed debt in the past by showing your information, credit accounts, inquiries, and any bankruptcies or collections you have.

Companies access your report to determine your creditworthiness. Anytime you apply for credit or even a place to live, your credit history will be looked at.

Credit score factors

Your credit score is calculated by an algorithm. The specifics are undisclosed by FICO and VantageScore, but they consider the following five things.

Payment history

Paying your bills on time is important since it influences your score the most. Late payments can make your score drop significantly.

Owed amount

You shouldn’t be maxing out all your credit cards. This is seen as risky to lenders. Once you pass 30% utilization of your credit, your score will start decreasing.

Length of accounts

The longer your accounts are open, the better. So, keep old credit cards open and try to charge them at least once a month to keep up that payment history.

New accounts

Don’t apply for more than one account in a short period of time. This will make lenders think you’re risky and in a financial bind.

Credit mix

Some variety in your credit doesn’t hurt. If you manage different lines of credit responsibly, your score will attract creditors.

Credit score ranges

Your credit score range will help lenders determine your dependability as a borrower. You’ll usually need a good credit score to get approval for most loans or credit cards.

Poor and fair credit scores

If you have a poor credit score, it’s unlikely you’ll get approved for any credit cards or loans. A fair credit score has a slightly better chance of approval, but you’ll have high-interest rates if approval occurs.

A poor or fair credit score can benefit from a secured credit card. Secured credit cards offer low credit limits and require a security deposit that is seized if you fail to pay your debt.

It’s a good alternative if you can’t get approved for a regular credit card or need to rebuild your credit. By making your payments on time, you’ll start boosting your credit score.

Plus, you’ll start building a score if you don’t have credit to begin with. For new credit builders, FICO needs your account to be open and active for at least six months before determining your first score. VantageScore, on the other hand, only needs you to have an active account for at least one month.

Good or very good credit scores

A good credit score can be easy to waver in and out of, but it’s your safest bet to get approved for all your borrowing needs.

Maintaining a good credit score can get you easily approved for car loans, mortgage loans, personal loans, and credit cards!

Your interest rates will vary depending on your exact score, income, and overall credit report, but you’ll be eligible for more rewards, better rates, and lower monthly payments when you have a higher credit score.

Plus, a good credit score makes you look dependable when renting a home or apartment. Although, your landlord may be looking for any blemishes on your credit report that may indicate you’re not a good candidate.

If you access your credit report and see derogatory or inaccurate remarks, Cool Credit can help. Cool Credit disputes faulty information harming your score so you can properly restore your credit.

The highest credit scores

There’s quite the difference between a 670 and a 720 credit score. Upgrading your credit score above 700 is what you should aim for.

For instance, if you were to apply for an auto loan for a brand new car, a credit score above 720 would get you low-interest rates. A good credit score, on the other hand, would almost double your interest rate.

Lenders set their own thresholds and use different scoring models. To get the best rates on the market, aim for 720 or higher for auto loans and 760 or higher for mortgage loans. You can still get approved with a good credit score, however, you’ll be saving big on interest with a better score.

Although, the highest scores don’t make much difference in comparison to each other. Moving from a 790 to 840 will probably get you the same deals, but moving from a 650 to 700 will greatly improve your credit journey.

Benefits of a good credit score

Better rates

A good credit score means you’ll get better rates. Interest rates are generally lower on loans or credit cards, but you’ll even get a better car or home insurance rates with a good score.

More credit

A good credit score also lets you borrow more. The credit limits on your cards will increase, and you’ll be eligible for bigger loans. It may be time to get that new car or consider buying some property once you’ve got a solid score. Just beware of overcharging your cards.

Rewarding cards

You can apply for credit cards with exclusive rewards like cashback, travel points, and more. Cards with promotional 0% APR periods are more accessible too.

Lower down payments

If you’ve just been approved to move to a new place, paying utilities may be one of your many responsibilities. Establishing utility accounts may require a down payment if you have low credit, but with good credit, the down payment may be waived altogether.

More opportunity

Some employers require a background check that includes a credit check. Don’t worry, they can’t run it on their own accord. According to the Fair Credit Reporting Act (FRCA), they need your written consent first. Nonetheless, a good credit score can make you a prime candidate for the open position.

Credit Repair

Suffering from a poor credit score proves difficult, but it may not be your fault. Sometimes, negative information is harming your score without your knowledge.

If you view something on your free annual credit report that’s not quite right, contact a credit repair company. Incorrect or negative information impacting your credit can be helped by companies like Cool Credit.

Cool Credit can help you with credit repair and credit restoration by contacting the credit bureaus and disputing eligible items on your report.

Join the 700+ club today. Call (833) 751–2665 or contact the Cool Credit team to learn more.

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Cool Credit is a hassle-free credit restoration company that fights to correct negative remarks on your credit report. www.coolcredit.com

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Cool Credit

Cool Credit

Cool Credit is a hassle-free credit restoration company that fights to correct negative remarks on your credit report. www.coolcredit.com

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