15 Ways Your Life Is Better When You Have Good Credit

You might think your credit rating is a little like that "permanent record" your teachers used to threaten you with — something that is ultimately unimportant to your life and that you can safely ignore. Unfortunately, unlike the permanent record that documented all of your school-age hi-jinks, your credit rating actually has a major effect on your adult life.

And while having a blemish-free record throughout your school years may not have gotten you anything other than the sincere gratitude of your harried teachers and administrators (and possibly some teasing from your classmates), having a good credit score will make your life better in lots of ways, both big and small. For example, consumers with excellent credit have access to better credit card rewards.

That's because your FICO credit score is an indicator of your credit health and financial responsibility, which means nearly anyone with whom you will have financial transactions will take that number very seriously. FICO categorizes "good" credit as a score between 670 to 739, "very good" credit as a score between 740 and 799, and any score of 800 or above (up to a maximum of 850) is considered "exceptional."

Raising your credit score within these ranges can make a big difference in improving your life. Here are 15 ways good credit makes your life better.

Whether you are hoping to take out a small business loan to start a new enterprise, qualify for an auto loan or a mortgage, apply for a new credit card, or get a private loan for education, having a good credit score will open up far more loan opportunities for you. Since your good credit score indicates to potential lenders that you will be responsible in paying back your debt, creditors will be much more eager to extend loans to you, and a good credit score means you will have a choice of loans available to you.

Check out how friend of Wise Bread Michelle Singletary of The Washington Post got a perfect 850 credit score.

While good credit opens up more options for loan qualification, it also lets you borrow money at lower interest rates. The higher your credit score, the better your interest rates will be on everything from mortgages to credit cards to auto loans. When it comes to mortgages, even a single percentage point shaved off your rate could save you tens of thousands of dollars over the life of your loan — and lower rates on other types of loans will also save you hundreds (if not thousands) of dollars. In short, borrowing is much cheaper if you have good credit.

Rewards credit cards allow their cardholders to earn all kinds of goodies, from cash back to airline miles to hotel points. But the most beneficial credit card rewards are generally restricted to borrowers with good-to-excellent credit scores. And these benefits can make a big difference in your bottom line. If you regularly use (and pay off) your rewards credit card, then you can end up getting hundreds to thousands of dollars' worth of rewards for "free" as long as you never carry a balance. This kind of perk can only be yours if you have good credit.

Your credit score can affect your housing decisions. If you are a renter, your landlord will likely require a credit check before you can sign a lease, and any black marks on your credit report — such as account defaults or foreclosures — can be enough to reject your rental application. That's because your landlord wants to be sure you'll pay your rent on time, and having good credit is a great indication that you will.

In addition, buying a home can be much more difficult without good credit. To start, you may not be approved for a mortgage at all with bad credit. Even if you are able to qualify for certain types of FHA loans with poor or fair credit, you may find that the terms of the loan will not work for your situation. That means you might be stuck renting when you had your heart set on the house of your dreams.
 

Auto insurance carriers have found that drivers with poor or fair credit are statistically more likely to get into car accidents. That means that the lower your credit score is, the more you can expect to pay for auto insurance.

The difference in rates that you will pay can be pretty hefty, even for drivers with otherwise similar habits. According to a Consumer Reports study from 2015, a driver with a poor credit rating could expect to pay $1,301 more per year for their auto insurance compared to one with excellent credit. Even just a "good" score with a flawless driving record can increase your rates by as much as $233 per year — when a moving violation in your past would only increase your rates by $122.

Qualifying for a loan requires a hard credit check, which means the lender will pull your full credit history to determine if they want to lend to you, and at what rate. The problem with a hard credit check is that it shows up on your credit report, and can potentially ding your credit score — and this potential negative makes it difficult to make an apples-to-apples comparison of loan or credit card offers without hurting your credit.

But if you have good credit, you can often pre-qualify for several credit cards or loans without a hard check. Pre-qualification only requires a soft credit check, which does not show up on the credit report. If you have good credit, you can pre-qualify for several loans or credit cards and compare them to find the best and cheapest option.

When you apply for a job with a new company or organization, they have the option of pulling something called an "employer screening report" that gives them the greatest hits of your credit report. This is not your full credit report or history (nor does it provide your credit score), but it does show your potential employer how you have handled credit or borrowing in the past.

This means that any bankruptcies, liens, or foreclosures in your past can be accessed by a potential employer. While this only truly matters if you are applying for a job that involves handling financial information, if an employer has the choice between two otherwise similar candidates, they are more likely to go with the one with good or excellent credit.

Both cell phone service providers and utility companies take your credit rating into consideration when you try to sign up with them. If you have poor or fair credit, you may find that you need to pay a security deposit to both types of providers in order to access their service. Those with good credit can get cell phone contracts and utilities without dropping a $100 to $200 security deposit for each one, which can make it much easier to move or change service providers.

Having good credit gives you a lot more power at the negotiation table in any number of circumstances. For instance, if you are looking to buy a new car and you were able to pre-qualify for an auto loan, you can negotiate the price of your new wheels in the same way that buyer paying with cash can. Instead of letting the car salesperson sell you on the "low monthly payments" you can focus on the overall cost of the car.

Similarly, you can also negotiate the interest rate on credit cards or loans, because you have other options. Having the ability to walk away from a lender that refuses to budge on your rate gives you the negotiation power. Having poor credit means you don't have that ability to defect to another company.

Refinancing your mortgage can be a great way to take advantage of lower interest rates, reduce monthly payments, or reduce the mortgage term — any of which can help to save you money over the length of your mortgage. But if you don't have good or excellent credit, you may not qualify to refinance your mortgage. Keeping a good credit score will allow you to keep the refinance option open, so you can jump on lower interest rates when it's most beneficial for you.

We all face financial emergencies from time to time, no matter how money savvy we are or how good our credit is. But if you do not have good credit, your options for getting out of the hole are much more limited. Those with good credit have the option of taking a personal loan to help them cover the gaps. With a good credit score, you are likely to be approved for the loan and are likely to receive good terms.

With a poor credit score, however, you will probably not be able to take out such a loan, or you will be stuck with high interest rates or a low borrowing amount. Keeping a good credit score can be one excellent way to protect yourself from the high cost of an emergency.

The better your credit score, the more money lenders will be willing to extend to you via credit. That means you'll have a higher potential mortgage, giving you more housing options, a higher small business loan, allowing you to start your new business in style, a higher auto loan, providing you with more choices of cars, and a higher credit card limit, giving you the ability to really make the most of any rewards offered by your credit card issuer.

If you have poor credit, then you are often only able to get a loan, a lease, a mortgage, or other financial product with a co-signer. This is tough because it means you have to find someone willing to co-sign on a loan with you, which can be a tall order. And if you are able to get a friend or family member to co-sign your loan, that means you have invited that other person into your financial life, which can be pretty uncomfortable. They may have some strong opinions about how you use your money and live your life.

Having good credit gives you much more freedom to take loans in your own name, and keep your finances more private.

While dating apps have not yet started asking for credit scores before matching you with potential sweethearts (thankfully!), you may still find that having a good credit score could make it easier to find true love. That's because 9 out of 10 people consider financial responsibility and important factor in finding a romantic partner, according to a recent Brookings Institution study. In addition, 30 percent of women and 20 percent of men stated that they would not even consider marrying someone with a bad credit score.

Having a good credit score means that you pay your bills on time, don't overspend, keep an eye on your credit report, and in general handle your money like a boss. While the good credit score is just one representation of your mad money skillz, knowing that you have this part of your financial life under control can help you feel powerful and able to handle anything life throws at you.

This article by Emily Guy Birken was originally published by Wise Bread.