Having good, better than average, or excellent credit ratings can make a world of difference in your financial situation. That’s because people with favorable payment histories and financial profiles can get lower interest rates on mortgages, serve as cosigners on student loans, pay low or no security deposits for a wide range of products and services, and obtain advantageous car insurance rates. Here are pertinent details about some of the main benefits.
There’s a direct relationship between credit scores and mortgage rates. When your scores are high or better than average, it’s possible to get lower interest rates on home loans. This single fact is the motivation for millions of working adults who struggle to keep their financial situation in good shape.
By paying bills on time, correcting errors on your reports as soon as you discover them, and keeping charge card balances as low as possible, it’s much easier for house shoppers to snag favorable mortgage rates. There’s another advantage, and it’s the buyer’s ability to negotiate with sellers and lending institutions. Having a solid payment history, a good or better than average score, and enough cash to cover a down payment are three of the core factors that help borrowers get favorable terms when purchasing a home.
Cosigning on a Student Loan
A little-known benefit of having a favorable credit score is that it enables a person to be a cosigner on another person’s student loan. Serving as a cosigner is a powerful way to help a prospective college student get approved and gain access to lower interest rates. Even a slightly reduced rate on a long-term debt obligation like a college loan translates into significant savings over the years.
Having good credit gives you, the potential cosigner, the opportunity to assist a child, friend, employee, or someone else with financing their education. It’s no secret that the price tag for a four-year degree is substantial and shows no signs of decreasing at any time in the future. For so many young people who can meet academic qualifications for schools, getting a loan is the single most challenging obstacle.
No or Low Security Deposits on Leases and Phones
When leasing equipment, renting a car, purchasing a new smartphone, or paying for a hotel room online, it’s nice to avoid security deposits whenever possible. If you have favorable scores on all three bureau reports (TransUnion, Equifax, and Experian), there’s seldom a need for merchants to ask for deposits on common rental items and equipment like phones. A related advantage is being able to set up utility accounts without paying an upfront fee or deposit.
Bargains on Car Insurance
Favorable credit ratings are like a gift that just keeps on delivering benefits without interruption. Along with all the other advantages of having a solid score on your bureau reports, you can usually snag serious savings on car insurance. The major carriers in the industry reward holders of high scores with reduced premiums.
Insurers know that those with good credit tend to make fewer claims and are less likely to get into accidents. It’s not an insignificant perk because, for a typical family of four, rate discounts can add up fast and save policyholders as much as 15% over regular prices for the same coverage.