Everybody knows it's important to keep your credit in good shape. Not only is a healthy credit score a good financial practice, but it's also a way to save money and increase your housing options in some cases.
This post explores all the hidden perks that accompany great credit, so you understand exactly what that good-to-excellent credit rating can get you. Did you know that you can get a free credit report once per year at annualcreditreport.com? You can also get your credit score for free at Credit Karma, Credit Sesame, Credit.com or Mint.
The Hidden Perks of Great Credit
Your credit score is your track record of financial responsibility. Maintaining excellent credit come with several perks, including a few that may surprise you.
- Easier to Buy a Home - You're more likely to get approved for a mortgage when your credit is strong. This increases your purchasing power in a market where record low interest rates have already made many homes easier to afford.
- Get a Better Phone Plan - Excellent credit can determine whether your wireless carrier grants you a contract with potential discounts or a costly month-to-month plan that often requires a security deposit.
- Lower Interest Rates on Loans - A good or excellent credit score earns you a lower interest rate on most loans and gives you the power to negotiate other elements, like a better repayment plan or a higher principal.
- Secure the Best Credit Cards - If your credit is in a good place, you could qualify for credit cards with excellent incentives and benefits. You may also land a higher credit limit if you've been proven to pay your bills on time.
- Discounts on Car Insurance - Insurance companies won't turn you away for bad credit, but they may raise rates. Maintaining good credit could lower your monthly premium.
- More Options for Renters - Good credit shows landlords you are responsible, which can potentially lower your security deposit as well as any fees required up front.
We're also sharing tips to help you build the strong credit you need to take advantage of these benefits, while clearing up a few misconceptions about how a credit score is actually calculated.
Tips for Building Excellent Credit
- Pay on Time - Payment history is the largest part of your FICO score at 35%, so pay bills on time to keep your score high.
- Keep Balances Low - Aim to use less than 30% of your credit limit.
- Pay Attention to Your Score - Monitor your credit score regularly to know where you stand. If it's lower than you thought, consider running your credit report to check for possible errors.
- Be Patient - While negative credit information is frustrating, it typically ages off your credit report after a few years, depending on the situation.
- Shop Smart - Do your research before applying for loans or credit cards to avoid unnecessary hard inquires that may lower your credit score.
Common Credit Misconceptions
- Closing my unused credit card account will help my score. Keeping old cards can boost your credit amount and credit history, which may improve your score.
- Checking my own credit score lowers it. This is a soft inquire that shouldn't affect your score.
- Any debt will hurt my credit score. Not all debt is bad. For example, paying the mortgage on time can raise your score. Excessive credit card debt, however, can lower it.
Building excellent credit now will prepare you as you apply for a new credit card, auto loan or mortgage in the future. If you're in the market for anew home now, give us a call at 781-635-9022! I can walk you through the process and refer you a great lender who can get you pre-qualified.