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We all know that you’re better off with a higher credit score than a lower one, but other than getting approved for more credit, what good does it really do? As it turns out, a lot! The difference between a high credit score and a low credit score can literally be thousands of dollars, even hundreds of thousands over time. In almost every type of loan, your credit score is vital in determining your interest rate and you already know how important interest rates are. For instance, people with the best credit scores typically get mortgage interest rates of around 6.25% and those with poor scores could have rates higher than 9.5%. Those three little percentage points are huge though, especially in terms of the standard 30 year mortgage where the person with the lower score would ultimately pay close to $150,000 more. Can you imagine having $150,000 more for retirement? It’s a staggering figure and pretty amazing even if you cut it in half. Let’s take a look at another type of loan that most people use at some point – an auto loan. While the savings won’t be nearly as high as a mortgage, someone with a high credit score would probably pay $2,500 less than someone with a poor score in a typical 36 month auto loan. That $2,500 could easily be your down payment on a brand new car. As you can see, having a good credit score can save you a significant amount of money on all types of loans by getting you a lower interest rate, but that’s not the only benefit of a good score.
Other Ways You can Benefit from a Good Credit Score
- One of the main factors that goes into to determining your insurance rate, be it auto, health, or home insurance, is your credit score. Generally, people with low credit scores tend to make more claims and therefore are a higher risk to insurance companies, so naturally they have higher premiums.
- Another benefit of having a good credit score is the possibility of getting better jobs or promotions. These days, employers almost always view the credit reports of possible candidates. The logic is that if you have a high credit score than you must be financially responsible and are likely to be responsible at your job as well.
- Deposits are another way you can potentially save some money by maintaining a good credit score. Cable, phone, and electric companies often make customers with poor credit scores put down a deposit on their account. That deposit can be upwards of $300 and can really be a financial burden when you’re moving into a new home.
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