Good credit is one of the most important things you can develop in your financial life. Your good credit can open doors for financial opportunities — and not just for loans.
In the last couple of years, I’ve seen firsthand how beneficial good credit can be.
Save Money When You Borrow
The most obvious benefit of good credit is the savings you receive on your interest charges when you borrow. Years ago, when my then-husband and I bought a home, we saved thousands of dollars during the time we had our mortgage because our good credit scores qualified us for the lowest rates.
I also saved money the last time I bought a car. That loan will be paid off this year, and I’ve kept the loan this whole time because the low 1.9% interest rate is easily beat by putting what I would have put toward paying off the car early into investments. I’ve seen returns of much better than 1.9% annualized since borrowing for my car.
Even my credit cards and personal line of credit come with lower interest rates, thanks to my credit. I rarely pay interest on these accounts, but on the rare occasions that I do carry a balance, it costs me much less than it would if I didn’t have good credit and had to pay a higher interest rate.
Other Financial Benefits of Good Credit
I currently receive a discount on my monthly car insurance premium because I have good credit. That’s a nice perk to enjoy, and I get it even though I’m not borrowing from the insurance company.
My recent cross-country moves have also been made easier because of my good credit. When we moved to Pennsylvania, the luxury apartment complex we wanted to live in required a credit check. Likewise, I wasn’t able to move into my current rental home in Idaho until after I passed a credit check. Without good credit, you might not be able to move into the rental you prefer because you are rejected in favor of someone else. My utility company also required a credit check before hooking me up.
There is also an element of peace of mind due to my good credit. I have been able to have liquidity. This came in handy when I moved across the country, and it is comforting now that I have medical bills due to a recent injury and an unexpectedly high tax bill due to my recent divorce.
Knowing that I have options (even if those options require a little borrowing) provides me with peace of mind. While I don’t expect to max out all of my available credit, it’s nice to know that there’s a backup plan if I need it.
Even if you don’t plan to borrow for anything, your credit matters. It’s how financial services companies make judgments about you. Bad credit can cost you more than you might expect, and good credit can open doors and save you money — even if you aren’t working with a lender.