You can definitely survive with bad credit. But life with a low credit score is a struggle. A good credit score makes your financial life so much easier that it would be a mistake to undermine the importance of maintaining a good credit score.
An excellent credit history is a reflection of your good financial behavior. It gives the potential lenders the confidence that you will be able to repay the loan in full and on time. Thus, it gives you an opportunity to lock in better interest rates and best terms on any loans. What’s more, the benefits of a healthy credit score extend beyond good interest rates on loans. Let’s take a closer look at the advantages of maintaining a good credit score.
Benefits of Maintaining a Good Credit Score
You become eligible to get loans easily
A high credit score means that you have been a great borrower, paying your debt regularly and on time. You then become an attractive borrower with a very low possibility of default in the eyes of the lender
Your loan applications are approved quickly
If you have a long credit history and a high credit score, banks and financial institutions may offer you pre-approved loans. This is one of the biggest benefits as you don’t have to wait for long to get your loan approved.
You get the loan at a lower rate of interest
If you have a high credit score, banks may consider your repayment history and offer you loans at the lowest interest rate and best terms. If you are lucky enough, you may even get discounts on the interest rates.
You get a credit card with better rewards and benefits
With a high credit score of 750 and above, you have a whole range of premium credit cards to choose from that have better benefits and rewards.
You get higher credit card limits
A high credit score not only gets you a credit card at a lower interest rate, but it also helps you in getting a higher credit limit. A high credit score gives the banks and lenders the assurance that you can handle the credit in a good way.
Your financial future is bright
Even if you don’t need a loan, or a credit card now, it is important that you maintain a good credit score for your future financial life. In the future, you may have the need to apply for a home loan, personal loan or a credit card. At that time, a high credit score can come handy and help you get the loan at desirable terms.
How to Maintain a Healthy Credit Score
- Always pay your monthly bills on time.
- As a rule of thumb rule, do not default on any payments towards your loans and credit cards.
- If you are not using your credit cards, do not close them. Keep them open so that they add to your long credit history.
- Keep your credit utilization ratio low.
- Don’t make too many credit inquiries at the same time.
- Maintain a good balance of secured and unsecured loans in your credit profile.
- Check and review your credit report periodically.