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Credit scores under the FICO model, the most popular one used today, range from 300 to 850. As you might imagine, a credit score of 850 puts you in a strong position to borrow. On the other hand, with a score in the 300s, your chances of getting approved for a loan or credit card are pretty weak.
Meanwhile, within that range, Experian, one of the three credit bureaus, says that a FICO® Score of 740 to 799 is very good, while a score of 800 or above is excellent. If you have a credit score in the mid-700s or higher, it could mean that you might have no problem getting approved to borrow money. And you might score a more favorable rate on a loan than someone with a score of, say, 650.
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But that’s not the only way a great credit score might work to your advantage. Here are some other ways you might benefit from having great credit.
The amount of money you’re charged for auto insurance will hinge on different factors. These include the type of car you have and its age, your personal driving record, and the area you live. But if you’re an applicant with great credit, you may find that you’re able to snag a lower premium rate than someone with a less favorable credit score when all of your other factors are relatively equal (meaning, you’re in the same ZIP code, have similar cars, and so forth).
Now at first, this might seem silly. Car insurance isn’t a loan — it’s a financial product you pay for. So why would your credit score matter?
A higher credit score is often taken as a sign that you’re someone with a good handle on your finances. So insurers tend to assume that if you’re careful with your money and debts, you’re more careful on the road and less likely to file a claim, too. Interestingly, some states don’t allow insurers to use credit scores when determining premiums (California, Hawaii, Massachusetts, and Michigan).
When you rent a home, it’s common to put down a security deposit at the time you sign your lease. That deposit may be the equivalent of a month’s rent, or it may be more or less.
Coming up with a security deposit may be tricky if you’re strapped for cash at the time of your lease-signing (say, because you just paid for a move) but have an otherwise steady job. In that situation, you may be able to use your great credit to your advantage by negotiating a smaller security deposit with your landlord. If you show that you have a history of paying on time, they may be willing to accept a smaller amount.
To be clear, a security deposit isn’t just to protect your landlord in case you damage their property. It’s also to protect your landlord in case there’s a month when you can’t make rent. But if you have a pretty impeccable history of paying your bills on time, that may be less of a concern for the person who’s renting you a home.
It can take money — and lots of it — to get a small business off the ground. And when your business hasn’t even been founded, it can be hard to get a business loan.
But you may have an easier time getting some sort of loan to start a business with, like a personal loan, as an owner with great credit. And even once your business is up and running, you may find that borrowing for it is easier if your credit remains strong. Access to funding could make it possible to grow your business — and earn a steady income for many of your working years.
Having a great credit score can do you a world of good. So if yours needs a lift, try:
Paying all debts and installment loans on timeAsking your landlord to report timely rent payments so you get credit for them (this doesn’t always happen automatically the same way mortgage payments get reported)Keeping your credit card balances low relative to your credit limit, or paying off existing balancesChecking your credit report and correcting errors
Remember, you definitely do not need an 850 credit score to benefit from the perks above. But if you can get your credit score into the mid-700s or higher, it could open the door to a world of opportunities.
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