You often hear about credit scores. There are a plethora of articles explaining how to improve your score, what contributes to it, and what a good number is. What’s the point of having a great score, though? Your credit history may impact more than you think.
1. Mortgage Approval
If buying a home is in your future, monitor your credit with a free credit check. Not only will a high number improve your approval odds, but it will also help get you a better loan. FHA and VA loans usually require around 580. Conventional mortgages and down-payment free USDA loans ask for at least 620. Lenders can offer you outstanding advice if you don’t quite make the cutoff.
2. Interest Rates
You may be able to secure a loan with moderate credit. However, the better your score, the lower your interest rate will be. Having a decreased interest rate will give you two options. You will either be able to borrow more funds or pay a lower monthly premium for borrowing the same amount of money. On large loans like mortgages, even 0.25% can make thousands of dollars of difference over the life of your loan.
3. Car Insurance Premiums
Your driving skills and credit history seem unrelated, but insurance companies make a connection. Statistics show that consumers with lower credit ratings file more claims. When providing quotes, your car insurance company will review your insurance history and credit report. Poor credit can mark you as an insurance risk and increase your monthly premiums. The substantial elevation applies in nearly every state and insurance company.
4. Rental Qualification
If negative marks in your credit history are preventing you from qualifying for a mortgage, you may turn to renting a home. While requirements vary between landlords, many applications require a minimum score of 620 to qualify as a tenant. As long as landlords are consistent, they can’t set their requirements where they would like. They are looking for peace of mind that they will be paid on time and in full each month. With poor scores, you may have to search for a private landlord as opposed to apartment complexes.
5. Credit Card Procurement
Credit cards are an ironic part of credit scores. Owning a credit card helps you build up your ratings, and having a good rating helps you qualify for a card. A clean history will qualify you for cards with lower interest rates, higher balance limits, and better perks. If you have a damaged score or short history, you may have to start with a secured card. Secured cards require a deposit upfront to mitigate risk.
6. Security Deposit Costs
Moving to a new home means setting up your utilities. Unfortunately, many gas, electric, and cable providers require a security deposit at the time of transfer. A great credit score can keep hundreds of dollars in your pocket by encouraging utility companies to waive your deposits.
Your credit history will follow you through all aspects of your financial life. Work hard to maintain a high score.
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