As the proverb goes, “May you live in interesting times” (or so we hope). When you read about the positive and negative effects that credit scores have on the decisions you make in life, such as how to rent an apartment or buy a car, you may wonder what the difference between credit scores and credit reports are. The short answer is that a credit score is a rating of your creditworthiness; it is the figure you see when you use an annual credit report, and it gives you a good idea of your standing when it comes to borrowing money. A credit report is information, but only from one credit bureau. Therefore, a good credit score is based on information from two credit bureaus (Experian and TransUnion).
A credit score of 740 or above is generally considered excellent
Even in today’s context, many people still believe that a credit score of 670 is excellent, and anything lower is considered poor. However, according to Fair Isaac (the company behind the widely used FICO credit score), the most common credit score in the United States is between 620 and 720. A score of 650 to 675 is considered to be excellent, and anything below 600 is considered poor.
Benefits of a Good Credit Score:
As an established and relatively stable factor in the lives of many consumers, credit scores have been around for decades. However, for many consumers, the positives of good credit are less widely known. As such, in this article, we will discuss what a good credit score means to consumers and why you should care about having a good credit score. A good credit score is important because it provides a good foundation for building a solid credit history, and is used as a key factor in how lenders will view your record when approving credit applications. In fact, there are many benefits to good credit scores. Following are the ten benefits of having a good credit score:
1. Good Credit Scores Are Helpful to Small Businesses
Many people often do not realize that a good credit rating is helpful to many small businesses as well. When a consumer has a good credit score, it means that lenders are willing to make a loan to that consumer. For example, if you want to buy a home, a lender is more likely to make the loan to you if you have a good credit score. If you want to rent an apartment, you are more likely to get that loan if you have a good credit rating.
So, a good credit ratings for a consumer can mean a variety of things. For example, when you buy a home, you may be able to get a better interest rate on the loan, or maybe you will qualify for a better mortgage loan.
2. Good Credit Scores Go with Great Credit History
Credit scores are often called “soft” credit scores, because they don’t have hard credit score numbers like your FICO score does. However, there are many aspects to credit scores that give lenders a good idea of how trustworthy a consumer’s credit history is. For example, lenders look at how often a consumer has paid back credit cards, how much a consumer is paying in monthly bills, and how much the consumer owes in total.
And finally, when you apply for a loan, lenders will want to see how responsible you have been with your credit history. A borrower with good credit history will not be denied an application simply because of past delinquency or bankruptcy.
3. A Good Credit Score Benefits Consumers
The obvious benefit of a good credit score is that it can help you borrow money, and in turn, this can help you get a good interest rate on your loan. But there are other benefits of having a good credit rating. In addition to being more attractive to a lender, you can also get lower rates on credit card products, can qualify for a better insurance rate and can be offered lower auto insurance premiums.
A good credit score can also help you save money on all sorts of other transactions, including renting an apartment, buying a car, or getting a cell phone. The bottom line is that having a good credit score is a significant advantage in all sorts of transactions, so you want a good ratings.
4. Good Credit Scores Can Help Pay Down Debt
If you have high credit scores, you can also save money when it comes to dealing with your debts. For example, if you have a 730 FICO score, that means that lenders will assume that you will be a responsible borrower, and therefore they are likely to offer you a lower interest rate when it comes to repaying your credit cards and loans. Similarly, a consumer with a 790-credit score has a high likelihood of being offered a lower interest rate when dealing with auto loans, or on other kinds of loans.
In fact, credit scores often have a significant impact on a borrower’s credit scores, and since good credit scores can save money and give consumers advantages that they wouldn’t otherwise have, it’s likely that having a good credit score is an important benefit of good credit. Good credit ratings will allow consumers to pay down their debts faster and save money over time.
5. Good Credit Scores Help Make Repayment Easier
Many consumers are paying down their debts and are trying to avoid carrying the debt load for too long. And because a good credit score will result in a lender giving a consumer a lower interest rate, this can be a positive when it comes to paying off debt.
Similarly, if a consumer has a good credit rating, they are more likely to qualify for a loan, and if they qualify for a loan, they may get better terms when it comes to interest rates, and this can save consumers a good bit of money.
6. Having Good Credit Scores Has More Than Just a Gimmick
One of the arguments in favor of credit scores is that they are not just used to determine how much you can borrow. In fact, having a good credit score can make life easier for consumers who are trying to do the right thing and pay back their debts. For example, a borrower with a good credit rating may qualify for a better loan, or maybe even get the job of their dreams because their good credit score helped them get through the credit approval process.
may end up having to pay off their debt in chunks over a much longer period, which can be hard on consumers, and it also makes the process more painful.
7. Good Credit Scores May Help You Buy a Home
Credit scores can also have a positive impact on homeownership. A borrower with a good credit score is more likely to get a good mortgage, and if a borrower with a good credit score can qualify for a good mortgage, this can make homeownership easier.
If you are looking to buy a home, it is probably a good idea to have a good credit score. Lenders look at your credit score when deciding whether to loan you money for the purchase. However, it is possible to get a home loan with a bad credit score, so don’t expect to get approved for a home loan unless you have a good score.
8. A Good Credit Score Is a Positive Thing
Of course, if you have a bad credit score, then this can have a negative impact on your credit score. And if a borrower has a bad credit rating, then they may be unable to get a loan at all. In fact, a borrower with a bad credit rating may be put into a position where they have to make payments at an interest rate higher than what they could afford. And this can cost a lot of money and cause a lot of stress. So, in some ways, having a good credit score can help you. For example, you might get better terms on a car loan. And if you are not paying your bills in a timely manner, you can have this have a negative impact on your credit rating.
Finally, there are many things to like about having a good credit rating. This is because a good credit score can help consumers succeed in life and can help them realize their goals. Having a good credit rating can help consumers take the next step in their lives, whether that’s getting a better job or taking the next step in their lives by buying their first home.
9. Have A Healthy Credit Score
Having a healthy credit score is an important part of getting and keeping good credit. It also helps you in some unexpected ways. For example, if a bank is offering an auto loan, if they do not have a healthy credit score, the bank may not be willing to make the loan. That could mean that you could be left without a vehicle.
If that were to happen, you could end up paying much more than you should have to pay, or you could end up having to take a different car, or it could even cause you to miss payments on other debts you have. For the same reason, if you have an unhealthy credit score, you might have a difficult time getting a loan to help you pay for things like furniture or a house.
10. Having A Good Credit Score Is a Personal Gain
Finally, many consumers do not care at all about the top-notch credit scores that they are given when they apply for a loan. Instead, they want a loan that will help them pay their debts in a reasonable amount of time, and so having a good credit rating can be a big advantage for them. In fact, this aspect of good credit scores can help consumers accomplish their goals better than a good score might on its own.
Just as your credit score is a personal thing that helps you, you can also set goals to improve your score. For example, if you are thinking about purchasing a new car, it can be beneficial to have a good credit score. Getting a loan that you can afford, and paying it off quickly, can help you save money and make the car payments more manageable. If you can manage this, then having a good credit score can help you reach your goals.
If You Have Bad Credit, It Can Be Risky for You
Not all consumers who have bad credit have it because they are careless with their money. Some consumers who have a bad credit rating have been negatively impacted by a major financial event in their lives. For example, consumers who lose their job, fall ill, or who have a major car accident can all have credit reports that reflect badly on them, and this can make borrowing a lot harder for them. In fact, people who have poor credit scores often have a hard time getting credit cards, even if they have a lot of money saved up. For some people, this means that they cannot easily take a vacation or buy a new home.
A good credit score can be a powerful tool to help you reach your goals, and if you know how your credit ratings work and how it impacts your future, then you can use this to your advantage. If you have good credit ratings, then it can save you money and give you other benefits. And if you have a bad credit rating, then it can give you more options and a better future.
Of course, there are some downsides to credit scores as well. While the rewards of good credit scores are real, there are costs as well, and you will need to decide whether they are worth it for you. And while a credit rating is something that people should learn about and work to improve, it’s also something that many people don’t give much thought to, and they can end up paying a price for it in the long run.