Your credit score is more than just a number — it’s a tool lenders use to assess your financial reliability. When your credit score is in good shape, it may unlock valuable benefits that can save you money and make your financial life easier to navigate.
Easier credit card and loan approvals, better borrowing terms, and access to premium credit card benefits are just a few perks of maintaining a good credit score. Whether you’re planning a big purchase in the near future or seeking greater financial freedom, keeping your credit healthy could make a meaningful difference.
Below are five key benefits of having good credit. Plus, learn the definition of a good credit score and tips for improving your credit for the future.
What is a good credit score?
In the United States, most lenders use credit scoring models like FICO® or VantageScore®, both of which range from 300 to 850. As a general rule, the higher your score climbs within this range, the better.
Although multiple types of credit scores exist, lenders use FICO scores the most — playing a role in 90% of U.S. lending decisions. With FICO Scores, most lenders consider a 670 or higher to be a good credit score.
What are the benefits of having a good credit score?
Good credit has the ability to save you money and make your financial life easier in several ways. Below are five of the top benefits of having a good credit score.
1. Easier loan and credit card qualification
A good credit score typically makes it easier to borrow money. Credit scores have a big influence over how lenders assess eligibility for different financing products. In fact, lenders and credit card issuers often require you to have a minimum credit score before you may be able to qualify for certain financing offers, like credit cards or loans.
For example, some card issuers might require a minimum credit score of 670 or higher to be eligible for certain credit card rewards offers. Premium credit cards may feature even higher minimum credit score criteria. Yet no matter what type of financing offer interests you, a good credit score could put you in a better position to qualify.
2. Lower interest rates
Lenders use credit scores not only to determine if you’re eligible for financing, but also to decide how much to charge you. And borrowers with good credit history and higher credit scores tend to qualify for lower interest rates.
It’s nice to qualify for a lower APR on a credit card. But if you consistently pay off your credit card balance by the statement due date each month, you can typically avoid paying interest charges on credit cards anyway. However, for large loans like mortgages or car loans, the potential interest savings from a lower APR could be meaningful. In some cases, locking in a lower interest rate on a mortgage or a car loan might save you thousands of dollars (or more) over the life of your loan.
➤ FREE TOOL:Credit card interest calculator
3. Better financing offers
Good credit scores can be a sign of financial responsibility. So, when you work to build or improve your credit, lenders and card issuers may be more comfortable offering you better terms on financing offers.
With a good credit score, you might qualify for higher credit limits on credit cards and larger loan amounts on installment loans like personal loans, car loans, and mortgages. (Keep in mind that lenders consider other factors, like income, when deciding how much money you can borrow.) Good credit may also help you access better credit card offers, maximize credit card rewards, and enjoy other premium financing benefits as well.
4. Lower insurance premiums
In many states, insurance companies can use credit-based insurance scores to help decide insurance rates. These scores differ from those lenders and credit card issuers use, but they’re still based on your personal credit history.
A good credit score may help you qualify for lower insurance premiums and significant potential savings. In fact, drivers with good credit could potentially save $1,462 or more annually on car insurance, based on CarInsurance.com data comparing them to drivers with bad credit.
5. Lower deposits
Many businesses rely on credit scores to determine the risk of taking you on as a new customer. Utility companies, cable providers, mobile phone providers, and apartment complexes are just a few examples.
With these types of businesses, a good credit score could empower you to establish service or a new rental contract without the need for a security deposit. But if you have a poor credit rating, you might have to put down a large deposit with a new account or lease (if you’re eligible to become a customer at all).
Tips to improve your credit score
To take advantage of the benefits of good credit, it’s important to keep your credit score in the best shape possible at all times. Here are three basic tips that may help you improve your credit health over time.
1. Review your credit reports often. You can get free copies of all three of your credit reports (Equifax, TransUnion, and Experian) from AnnualCreditReport.com. Make sure your credit information is accurate and dispute errors with the appropriate credit reporting agencies.
2. Avoid late payments. Paying credit obligations on time is critical when you’re trying to earn good credit since 35% of your FICO Score is based on payment history. Even the occasional late payment could be a big setback where your credit scores are concerned. Unfortunately, late payments can stay on your credit report for up to seven years. But any negative score impact they may have does lessen over time.
➤ SEE MORE:How long do late payments stay on your credit report?
3. Pay down credit card balances. Your credit utilization ratio — the relationship between your credit card limits and balances is another important credit score factor. Paying down credit card debt isn’t only a smart debt management strategy, it can also have a positive impact on your credit.
➤ SEE MORE:How much of your credit should you use?
Bottom line
Your credit score plays a meaningful role in your financial life. Good credit can help you access better loan and credit card offers, lower interest rates, maximize credit card rewards, and enjoy other perks.
On a positive note, you don’t need a perfect credit score to start enjoying the benefits of a good credit score. Just work to earn and maintain good credit over time and your efforts could add up to big savings, increased financial flexibility, and greater peace of mind.
