Personal Finance Why It's Never Been More Important to Have a Good Credit Score
Why you need a good credit score
Here’s why you should make building and maintaining your credit a top priority, now more than ever.
The higher your credit score, the lower the interest rate you’ll typically qualify for on loans and credit cards. With interest rates already high and likely to climb further, every fraction of a percent you can shave off will result in major savings over time. Maximizing your score could mean the difference between a 5% versus 15% interest rate on a mortgage or auto loan, for example.
Better approval odds:
Lenders have tightened their approval requirements in the uncertain economy. Borrowers with excellent credit stand the best chance of being approved for loans and credit cards at the most favorable terms. A high credit score signals to lenders that you manage credit responsibly.
More financial opportunities
Beyond just loans and credit cards, your credit score can impact many aspects of your financial life. Landlords often check credit before approving tenants; some employers run credit checks before extending job offers; insurers may use credit to set premiums. A clean credit history shows financial responsibility and opens doors.
Higher credit limits
For credit cards and lines of credit, the higher your score, the more likely you are to be approved for higher limits. Higher limits allow greater flexibility in emergency situations. Also, your credit utilization ratio (the percentage of credit you’re using) stays lower if your limits are higher, which boosts your score.
How to boost your credit score:
Now is the ideal time to check your credit reports for errors, pay down balances, and implement good credit habits. Here are some habits that will give your credit score a helpful boost:
- Making consistent on-time payments every month, as avoiding late payments accounts for 35% of your total credit score. A single late payment can knock your credit down score by 100 points for many months.
- Having a good credit mix. Your credit mix determines 10% of your credit score, so various open credit accounts—credit cards, installment loans, and mortgages—can help improve your score.
