There are a few numbers that pretty much determine your life. For instance, an SAT score is boasted as an objective and valid predictor of academic success. Another number with huge weight in your life is your credit score.
Lenders use this number as an objective and valid predictor of debt repayment. A good FICO score will definitely help you out. Here’s how:
You'll qualify for loans more easily and get better terms on your mortgage. In fact, the high/low credit score difference on a 30-year fixed mortgage is about $300 per month. That's $100,000 over the life of the loan. Utility accounts such as electricity and cable may also check your credit report to determine your rates.
If you’re renting, it will be much more difficult to secure a lease with bad credit. Prospective landlords may see blemishes and require a larger deposit or just turn you down.
Auto loan rates are influenced by your credit score. If you have a high credit score (like 750 and up) you can usually get great terms on a car loan, but if you have a low score you will have high rates even if you’re approved. When you go to get car insurance, your credit matters there too. Over 90% of auto insurance companies use credit data to calculate your insurance risk score.
A good credit score leads to more credit. If you apply for more credit, companies will check to see if you qualify and what terms you should receive. Your offers and rate options will depend on your credit. With good credit, you can usually get rewards cards with low APRs and other perks. If you’ve got a bad score, you’ll have to stick with secured and prepaid cards.
So what is a “good” credit score?
According to MyFICO.com, the average credit score is 689. You can compare yourself along this metric, but the scale breaks down to these grade ranges.
Excellent: 750 and up
Good: 700 – 749
Fair (650 – 699)
Poor (600 – 649)
Bad (below 599)
Don’t get below 599! What’s the big secret? Always pay your credit cards in full every month and pay your other bills on time. That’s it! It’s that simple – if you can’t afford one of your “wants” then don’t use credit or an instant loan. If you can’t afford it, have the discipline to postpone gratification and save up. Who knows? By the time you save the money, you might not even want it anymore.
Even though this sounds very easy, fate can deal hefty blows. If you lose your job or have other extenuating circumstances, you may not have a choice but to take credit just to survive. If you are in a situation where you can build and maintain good credit, be thankful. The benefits are plenty!