If it were up to individuals to decide, many people would not take credit for any reason; either personal or business. Although the negative aspects of a debt are felt mainly when the borrower cannot pay, it is not a premeditated scenario. When a financial institution deems a borrower’s credit score to be good or at least decent, most lines of credit are willing to offer lines of credit. There is a lot of talk about what a good credit score is, and for most people, strategizing how to achieve it is a daily struggle.
A borrower may feel pressured to repay a line of credit and may feel like they are denying themselves too much to look good to the banks, but it’s worth it. It may not seem like a huge benefit to yourself, but maintaining a good credit score is good for you, at least when it comes to future financial assistance. Is it possible to have more simply because more effort has been put into paying off a loan, mortgage, or credit card debt? The honest answer is YES! A fairly decent credit score is good, but getting a good score is even better considering the many areas that will benefit;
favorable mortgage rate
Due to the fact that mortgages are paid off over a long period of time, a homeowner can spend less money on interest if they pay off the facility within a shorter period of time. Interest is paid even lower if the borrower’s credit score is high. According to data made public by MyFico.com, a consumer with an average credit score of 760 or more would obtain a mortgage at an interest rate of 3.74%, while another whose score is around 700 would obtain the same facility at 3.96% interest. What is a good credit score? A cheaper mortgage!
Cheaper car loans
A car is a necessity and if there is a way to get it at a lower value, getting your credit score is one of them. On average, car loans are made in the neighborhood of $26,000 and considering that the average car owner will pay this back within five years, interest rates definitely make a difference in how much money is paid back. One can expect to save an average of $598 over the entire period with a good credit score. What’s a good credit score if it can’t get you a car at a cheaper cost?
credit card rewards
Plastic money has grown in popularity over the past decade, and while some people see it as a source of cheap credit, the amount of money spent on the card as interest depends on the borrower’s average score. The best credit card for good credit offers an APR as high as 17% or as low as 13%. The general assumption that lenders make is that a well-rated borrower will pay off their debt quickly and the balance at any given time is likely to be low. Marketing their credit card service as the best credit card for good credit, some lenders will offer 0% interest on credit for the first year to potential customers with a good score. This means that people whose credit scores are considered low or average will have to pay an interest rate in the first year of service. Other benefits that the best credit card for owners of good credit can reap by maintaining good credit scores are free airline miles, loyalty points for using the card, and cash back rewards.
Low interest on student loans
Some people are able to finance their own education through savings, sponsorships, or even through programs like work-study. These facilities are not always available and the need for financing from a lending institution may arise when the opportunity to go back to school presents itself. Loans granted to finance education are issued on the basis of credit quality. The higher the credit, the less risky a loan is considered and to account for this risk, lenders offer interest rates accordingly.
Commercial financing when necessary
Starting a business for good costs money and for many entrepreneurs, the only obstacle between them and prosperity is a financial partner who believes in the validity of their business idea. A startup lacks a strong business credit history, and lenders find it easier to consider consumer scores when assessing credit risk. Therefore, maintaining a good credit score is not only good for accessing financing, but also for qualifying for low interest rate facilities.
