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You probably know how important your credit score is in theory. But what does fixing your credit score mean in a practical sense? Besides helping you buy a home or rent a place, there are quite a few perks to having a better credit score. We’re going to chit-chat a bit about four perks in this post.
Benefit #1: Lower Interest Rates
If you’ve ever gotten a loan, whether it be a car loan, personal loan, or even a credit card, you understand the importance of a low-interest rate. A high-interest rate increases the price you pay when you borrow money.
When you fix your credit, you can qualify for competitive rates because you’re less of a credit risk. This allows you to save a lot of money down the line. Just imagine the difference in cost and payments if you had a 3% interest rate on a car loan instead of 12%.
Let’s breaks it down quickly. Borrowing $10,000 with a 3% interest rate for five years can cost you under $800 in total interest paid. Borrowing $10,000 with a 12% interest rate for five years will cost over $3,000 in interest. As you can see, improving your credit score can lead to BIG savings.
Benefit #2: No More High Security Deposits
Have you ever applied for an apartment, phone plan, or utilities? If your credit is bad, you most likely had to pay more out of pocket up front for “security” reasons. The security deposit (or down payment to start a service) is money that companies hold on to just in case you don’t pay your bills. Fixing your credit means you may not have to put down money upfront.
For example, T-Mobile bases how much you pay for your phone upfront by looking at your credit score. The lower the score, the more you pay. By having a higher score, your down payment (or security deposit) may be significantly less! Now imagine how much money you’d save on deposits if you increase your score.
Benefit #3: No Need For A Co-Signer
Fixing your credit can help eliminate the need for a co-signer. A co-signer is someone that may be required to be on a loan with you if you have less-than-stellar credit. This person is guaranteeing your loan and will also be on the hook if you default. When your credit is good, you don’t have to find someone to co-sign on your loan as a favor.
Benefit #4: Better Rates on Insurance
Lastly, did you know that your credit affects your insurance rates, especially your car insurance? While other factors come into play like your location and driving history, car insurance companies also like to see that you’re responsible with your finances. Your rate could be reduced dramatically when you have a higher credit score.
There are many other amazing benefits of fixing your credit, but these are a few of the biggest money savers. Fixing your credit may seem like a tall task, but there are tangible benefits for putting in the work.
Need help improving your credit? You can try credit repair. Lexington Law is a trusted leader in credit repair that may be able to help you improve your score. Learn more here.
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