The benefits of a high credit score are extensive. Fortunately, according to Experian the average American has a credit score of 714, which is considered “good” on both the FICO and VantageScore rating systems.
So, is a good credit score a high credit score? The answer to that is that it is acceptable to most lenders. You rank in the middle of borrowers. You have a higher credit score than many, but you can also improve it.
Experian’s data suggests only 21.6% of the population have a good credit score between 670 and 739. The largest segment of Americans actually falls into the very good range of between 740 and 799 (28.1%). A further 21.9% have excellent credit scores between 800 and 850.
While credit score models can vary, they are all meant to predict the likelihood of you paying your debts. As a result, improving your credit scores is always as good thing to do, since lenders may offer you more.
Conversely, 21.6% of Americans have poor credit scores of between 300 and 579. A further 15.8% have fair credit scores of between 580 and 669. These credit scores can have a negative impact on borrowers, sometimes in ways they may not have considered.
If you already have an exceptional credit score, you may not need this information. However, everyone else could learn something from what follows. These 12 benefits of a high credit score include some that you may not have considered.
Benefit 1 – Costs Less to Borrow
Lenders reserve the lowest interest rates for those with a good, very good, or excellent credit score. That’s because lenders consider those with the highest credit scores less risky.
Those with lower credit scores may have had missed or late payments or even accounts in collections or a bankruptcy. They’re statistically more likely to manage their credit poorly, so lenders charge them more since they’re assuming more risk.
The same applies to those who haven’t established a positive credit history yet. Lenders do not know how well they will manage credit, so they charge them higher interest rates to recoup their money as quickly as possible.
As an example, personal loan rates in the US can range from 7 to 36 percent, depending on the lender and your credit score. If you have a high credit score, lenders are more likely to offer you loans on the lower end of the scale. If you have a poor credit score, they may offer you loans at the top of the scale.
Unfortunately, this means that those with lower credit scores pay considerably more. A difference of a few percentage points on a personal loan can result in hundreds or thousands of extra dollars paid in interest over the term.
As a result, achieving a high credit score often means it’s far cheaper to borrow money. Maintaining a high credit score can also save you considerable money through your life, because it can affect every credit product.
Benefit 2 – Better Terms
Interest rates aren’t the only factor impacted by credit scores. Lenders are also more likely to offer you more repayment period choices and more options regarding your payments.
For instance, you may be able to accelerate repayment without penalty. The lender may also offer you a variety of repayment terms so that you can better tailor your payments to your finances, such as bi-weekly or bi-monthly payments. You may be able to extend your loan to lower your payment amount too.
Many of these options may not be available to those with fair or poor credit. Yes, they may be able to find a lender that will offer them a loan. However, the terms offered will undoubtedly be less attractive than those offered to those with a high credit score.
Consequently, it is common for those with lower credit scores to face shorter repayment terms. The lender may also insist that repayment coincides with paydays to reduce risk. Additionally, those with poor credit may have to pay more fees and penalties during the borrowing and repayment process.
Benefit 3 – Higher Credit Limits
Another one of the benefits of having a high credit score is that lenders tend to offer you more money. Large loans are almost always reserved for those with a strong credit and repayment history.
Furthermore, a higher credit limit affects your credit utilization ratio. This can potentially boost your credit score even higher.
Benefit 4 – More Credit Offers
High credit score benefits definitely include access to more credit products. Once you achieve a high credit score, lenders will bombard you with a variety of offers such as credit cards.
You may also qualify for quick money loans for emergencies, based solely on your credit scores.
Benefit 5 – More Borrowing Options
High credit score benefits also include diverse borrowing options. You may be able to upgrade your credit cards for more perks and potentially qualify for a line of credit, personal loan, or a mortgage.
Benefit 6 – Easier Approval
When you have a high credit score, you’ve proven you’re the ideal reliable borrower. Consequently, you’ve improved your odds of loan approval. Lenders are more likely to rubber stamp your application for almost any credit product.
Benefit 7 – Negotiating Power
Negotiating power is definitely one of the benefits of a high credit score. You can shop around for the best offer and use that information to your advantage.
If you’d prefer to work with a particular lender such as your bank, ask them to match the best offer. Otherwise, you have the option of taking your business elsewhere to save money.
Benefit 8 – Access to Perks
High credit score benefits also include access to more perks. This is especially true with credit cards that only offer the best travel and cash back deals to those with higher credit rankings.
Benefit 9 – Strong Reputation
The benefits of having a high credit score go far beyond borrowing. Employers and landlords often access your credit scores to get an idea of what kind of person you are.
As a result, a high score provides others with a good impression of you as a person. You’re responsible, reliable, and this information can be the tipping point when someone is trying to decide between you and another candidate.
Benefit 10 – Better Prepared
Building up your credit scores is always a smart thing to do. Perhaps you only need a few credit cards at the moment, but you might want to take out a personal loan one day.
As you progress through life you may want to buy a home too. A high credit score is essential if you want to obtain a good rate on a mortgage. Being a trustworthy borrower also comes in handy if you ever want to refinance, take out an auto loan, or start a business.
Benefit 11 – Lower Insurance Rates
Yes, one of the benefits of a high credit score is often lower insurance rates. Some insurance providers discount your premiums since they consider you more responsible and less likely to make a claim. Those with poor credit scores could pay up to twice as much in insurance premiums as those with high credit scores.
Benefit 12 – Less Hassle in Life
Undoubtedly, one of the greatest benefits of a high credit score is convenience. Whether you want to set up a cellphone plan or hook up utilities, your credit score could play a role. If you have a high credit score, you can do usually do these things without paying a deposit.
How Can You Increase Your Credit Score?
Most creditors agree that the most important habit you should form to achieve a good credit score is to pay your bills on time. Setting up reminders on your calendar or auto pay through your financial institution can help.
However, there are many other things you can do to improve your credit score. Even a little can mean a lot, so always optimize your credit scores before it is time to borrow.
Do You Need a High Credit Score to Borrow?
Not necessarily. Even though mainstream lenders tend to favor those with at least good credit, you have other choices if you don’t fall into that category.
For those that have been turned down by traditional lenders and those that know that they have less than perfect credit, an alternative lender may be able to help. Alternative lending often fills the gaps left by mainstream lending. Consequently, most people can find a financial product that suits their particular situation.
Try FlexMoney’s Extensive Lender Network
FlexMoney is your best option if you want to discover whether you can qualify for personal loans and what’s available to you. Our huge network of lenders includes a wide variety of reputable lenders offering top-notch online loans.
Fill out one application and we will align you with your best possible options. It’s simple, fast, and easy and the application process does not affect your credit scores. You could qualify for anything from a quick cash to a personalized installment loan.
Apply today and connect with the best alternative lending platform in the U.S. Lenders offer loans of between $200 and $35,000, that can be used for almost any purpose. Why wait? Your timely payments could help to increase your credit scores too.