Related Articles
Top Benefits of a Good Credit Score
Jenius Bank Team1/4/2024 • Updated 12/6/2024
A high credit score may help you secure lower rates when financing a large purchase. Your credit score has a lot of sway when applying for a new loan, opening a new credit card account, purchasing a car, or buying a house. A credit score represents your financial habits to lenders and other parties, and credit scores often open doors to a variety of benefits.Let’s look at some common benefits you may see with a high credit score.
* Rates as of November 26, 2024
Key Takeaways
- High credit scores tend to show prospective lenders and credit card issuers that you’re financially responsible.
- You could increase your credit score over time by paying your bills on time, paying off what you owe, and monitoring your credit report for errors.
- Great credit scores may make borrowing money cheaper by helping you get lower rates on loans and credit cards.
What’s a Good Credit Score?
What counts as a good credit score depends on the scoring model you’re looking at and the lender you’re working with. Lenders, banks, and other financial institutions use two main methods or systems that calculate credit scores: FICO and VantageScore. Both systems have a range of 300 to 850 but use different calculations to determine your score. FICO considers scores between 670 and 739 to be good, and anything over 739 is considered very good or excellent.1 VantageScore considers scores between 661 and 780 to be good with anything higher than 781 being excellent.2In addition to the different scoring bands set by FICO and VantageScore, individual lenders are allowed to set their own credit score requirements and may have different interpretations of “goodness” in scores.What Can You Do with Good Credit?
Good credit scores don’t just show prospective lenders that you may be a responsible person and able to manage your finances. They may open several doors that you may otherwise not have access to. Here are some common advantages high scorers may experience.Higher Likelihood of Approval
Lenders use your credit score to gauge whether you’re a risky borrower. A higher credit score usually indicates lower risk and may help you get approved for a loan or new credit account.Qualify for Lower Rates
A high credit score may also result in access to lower rates on credit cards and loans. Those lower rates mean you could save on interest over the life of your loan. What does that look like in real life? Let’s take a look at average personal loan rates by credit score:3| Credit Score | Average Personal Loan Rates* |
|---|---|
| 720 – 850 | 10.73% – 12.50% APR |
| 690 – 719 | 13.50% – 15.50% APR |
| 630 – 689 | 17.80% – 19.90% APR |
| 300 – 629 | 28.50% – 32.00% APR |
Receive Higher Credit Limits
Higher credit scores often show lenders and credit card issuers that you’re financially responsible and likely to make your payments on time. For this reason, lenders typically offer you higher credit limits or loan amounts because you’re considered a less risky borrower. This may make it easier to qualify for a mortgage if you’re buying a new home or to get a car loan if you need to replace your current car.Access Prescreened Offers
Credit card issuers often want to work with individuals with high credit scores and may send out pre-screened offers with unique benefits and rewards to entice those individuals to apply. They often perform soft credit inquiries to identify candidates, which allows them to see your credit score without causing it to drop. If your score meets their criteria, they send you a prescreened offer that may include benefits like 0% APR for a set time period, bonus miles, or cash back if you purchase a certain amount. If you apply for the offer, the card issuer performs a hard inquiry before issuing the card. Hard inquiries may impact your credit score, but your score usually rebounds quickly if you continue making smart financial choices.Secure Better Insurance Rates
Believe it or not, your credit score may also impact the rates you receive on your car and home insurance. Since your score provides a snapshot of whether you’re financially responsible, insurance companies may look at it before giving you an offer. When it’s high, they may reward you with lower premiums. Insurance companies may also check your score when you’re an existing customer. The results of this inquiry could impact decisions to raise or lower your premiums when renewing your coverage.4Appear Responsible to Potential Employers
In some industries, employers check your credit report as part of their background check process. Doing so may help them make hiring decisions for certain jobs, such as managerial roles or cash-handling positions. While your credit report doesn’t show your credit score, it’s another window into those same financial behaviors. Credit Reports note if you haven’t made on-time payments or have any derogatory marks, such as foreclosures or bankruptcies. (Note that these types of marks stay on your report for different periods of time.)Increase Your Chances of Qualifying for a New Rental Home
Landlords and rental agencies may check your credit score as part of their initial screening process. When you have a low credit score, it may signal to your potential landlord that you may not be able to pay rent on time. But when your score is higher, landlords may be more comfortable working with you. The higher your credit score is, the more responsible you’re likely to be with your finances. And since landlords want to lease to renters who pay their rent on time, they may be more likely to give you the rental over another prospective tenant with a lower credit score.Ways to Achieve a High Credit Score
Curious about ways to boost your score? Here are a few simple ways that may get your score up.- Pay bills on time: Paying bills on time helps show that you’re financially responsible and establishes a positive history with the credit bureaus. This is also one of the largest factors used when calculating your credit score. Having a proven track record of making payments on time and in full could help strengthen your credit history and may boost your score.
- Check your report for errors: Get in the habit of reviewing your credit report at least once a year for errors like the same debts appearing more than once, incorrect credit limits posted for your credit card, or accounts in your name that you didn’t open. Report those errors as soon as you find them.5
- Apply for new credit intentionally: Applying for new loans and credit cards means a hard inquiry which could lead to a temporary dip in your score and applying for a lot of credit at the same time may ultimately be a red flag for creditors. So, being intentional about those hard credit pulls is important.
- Diversify your credit mix: Your credit score takes into consideration the types of credit you have. When possible, try to have a mix of loans and credit cards to establish a diverse credit mix. Keep in mind that you still only want to apply for the loans or lines of credit that you truly need.
- Look for alternative ways to boost your credit score: You may also be able to use your payment history with your utility providers to boost your score over time. Contact your gas, electric, internet, and cell phone provider to see if they can report your activity to the credit bureaus.6
Final Thoughts
Having a high credit score may make qualifying for loans and credit cards or purchasing a new home easier and more affordable. Remember that a high credit score is just one part of your financial well-being journey. Check out our achieving financial wellness guide for tips on other ways to set your finances up for success.Financial WellnessBorrowing & Credit