You maybe able to survive with bad credit but securing credit can be difficult and it definitely won’t be cheap. If you took the time to building and managing your score, then you will have no trouble getting credit with favourable terms when applying for loans or an overdraft. If you’re looking for reasons to maintain your good credit, here are some great benefits to having a good credit score.
1. Low Interest Rates on Credit Cards and Loans
The interest rate is one of the costs you pay for borrowing money and, often, the interest rate you get is directly tied to your credit score. Having a good credit score means you are most likely to be offered the best interest rates therefore, you will pay lower interest rate charges on credit card balances and loans. The less money you pay in interest, the faster you’ll pay off loans or credit balances.
2. Better Chance for Credit Card and Loan Approval
Borrowers with a poor credit history typically avoid applying for a new credit card or loan because they’re most likely to be rejected and if they do get accepted, they generally don’t get favourable terms on interest rates. Some avoid applying because they fear being rejected as they’ve been turned down previously. Maintaining a good credit score doesn’t necessarily guarantee approval, because lenders will still conduct credit search which takes different factors like your income and debt ratio into consideration. However, a good credit score increases your chances of being approved for new credit. In other words, you can apply for a new credit card with confidence.
3. Get Approved for Higher Limits
The amount of credit you can borrow is based on your income and your credit score. The main benefits of having a good credit score is that lenders are more likely to offer you loans or overdrafts with high credit limit. This is because you’ve demonstrated that you can manage your finances properly, repay what you’ve borrowed, and you aren’t reliant on credit. You may still get approved for some loans with a bad credit score, but the amount of credit lenders will offer you will be limited.
4. Easier Approval When Renting a House or an Apartment
More letting agents and landlords are now using credit scores to screen tenants. This is ensure they’re renting properties to tenants who are trustworthy and will pay their rent on-time each month for the duration of the tenancy agreement without issues. A bad credit score, especially if it’s caused by a previous eviction or outstanding rental balance, can severely damage your chances of securing a tenancy agreement. A good credit score saves you the time and hassle of finding a landlord that will approve tenants with bad credit.
5. Avoid Paying a Security Deposits
Depending on the type of credit you are applying for, you maybe required to pay a security deposit. If you wanted to make a huge purchase e.g. buying an expensive laptop, with bad credit score lenders may ask you to pay some money upfront which is known as security deposit. If you have good credit you will avoid paying a security deposits when purchasing items on credit and may receive favourable terms.
6. Bragging Rights
Because of all the benefits, a good credit score is something to feel good about, especially if you’ve had to work hard to build your credit score from bad to good. It also gives you gives you confidence that when you do decide to apply for credit you are likely to be approved and offered good terms. If you’ve never had to experience a bad credit score, keep doing what it takes to maintain your good score.
If you have never looked at your credit report read How to Check Your Credit Score.