If you lack this personal financial attribute, this will likely cost you literally tens of thousands of dollars (or possibly even hundreds of thousands of dollars) over your lifetime.
Good credit means that you can get favorable interest rates on car loans (or leases) and mortgages on houses. Bad credit will cause you to pay sometimes exorbitant rates for these same loans (if you lucky to get one).
Consider the tangible example of a thirty year fixed rate mortgage for $300,000 on a house for which you make a 20 percent down payment. With really good credit you may qualify for a 4.061 percent interest rate and an estimated monthly payment of $1,432 per month. With less good credit, you may instead get a 4.563 percent interest rate that translates to an estimated monthly payment of $1,520.
See for yourself here: Mortgage Payment Comparison
This half a percentage point interest rate amounts to about a $90 difference in monthly payments. It may not sound like much on the surface, but when you multiply it by 360 months then you get a lifetime loan payment difference of $31,680 for the same house and mortgage.
Having good credit will measurably improve your life in so many areas. In this article we will consider the many personal advantages to good credit. These include psychological benefits, travel/vacation and entertainment benefits, price protection and warranties benefits, security and safety benefits, and financial benefits.
The Psychological Benefits of Good Credit Score
You can not overlook or underestimate the psychological benefits that come with having good credit. If you do not have it, then every time that you apply for credit will be the next in a series of potentially embarrassing moments.
This is only the beginning though.
Bad credit causes so many problems that may not immediately come to mind. If your credit is poor and you are behind on your bills, you will likely not sleep well at night because of abusive collector calls and the stress these create. You will suffer from the frustration and disruption of fighting with family members because of money problems.
With good credit, you will feel financially secure for yourself and for your family. This provides you with both the confidence and stability that you crave in life. Good credit means that you are well prepared for any unforeseen financial emergencies. When you are ready to buy a car, a house, or take out a personal loan, it will leave you in a stronger negotiating position.
Your odds of being approved for these loans and credit cards are much higher with superior credit.
Good credit can make a big difference in your professional life as well as for your personal one. Should you need to rent a house or an apartment, you will find it easier to get approved when you have good credit. You can get qualified for a mortgage loan application easier, with a potentially lower down payment, and at a more competitive interest rate that translates to tens of thousands of dollars over the life of the loan as we saw in the earlier example.
Since around half of employers now check the credit of their prospective applicants, having good credit can determine whether or not you get a competitive job. This alone could radically impact the rest of your life.
The Travel, Vacation, and Entertainment Benefits
There are countless benefits to having good credit where travel and entertainment are concerned as well. If you are able to qualify for some of the best travel perks credit cards offered today (like Chase Sapphire and American Express), this can dramatically impact your vacations and even frequency of travel in your life.
Let’s look at just a few examples of travel benefits that you gain with these types of valuable credit cards.
For starters, you will be able to purchase less expensive airline tickets or to receive airline upgrades using your bonus miles in the travel rewards program. This can save literally hundreds of dollars every time you use it. You also receive a range of insurances for your trip through these travel rewards credit cards and programs. It starts with free trip cancellation insurance, extends to travel accident insurance, and often includes even travel interruption insurance policies.
The peace of mind that these policies provide is invaluable and allows you to only worry about enjoying your vacation.
Another great benefit is the luggage protection policy that these rewards cards typically include. Perhaps the greatest savings with luggage comes down to the free checked bag many cards like Chase Sapphire and American Express offer. This perk is a really big deal, in particular if you are travelling as a family.
Just the savings on a free checked bag (per traveller) can amount to $50 per person, or over $200 when travelling with a family of four.
Having fantastic travel rewards credit cards from good credit can also allow you to qualify for a less expensive weekly rate for vacation rentals and even rental cars. It can give you comfortable perks like access to airport lounges (with food and drinks provided) and concierge services on your trip that ensure you get the most out of your travel. Rewards programs can provide you with significant financial savings through such perks as free hotel stays, free rounds of golf, and even free museum entrances.
You can even get Uber credit for ride shares.
A major perk for concert lovers (that cards like American Express provide) is the ability to access tickets before they go on sale to the public and to experience VIP packages. You can see how having strong reward credit cards can impact your ability to take more trips and to enjoy vacations and entertainment on a significant level.
Price Protection, Warranties, and Guarantees Benefits
This is an area of good credit benefits that many people overlook. It can save you countless headaches and frustration (when you buy things) if you have credit cards with which to purchase them. Many of today’s Visa and Mastercard branded credit cards come with purchase protection like price guarantee protection.
They will also give you guaranteed returns if an item is not what you expected and extended warranties in case it stops working or breaks.
Discover cards are famous for offering quarterly cash back on everyday purchases like gas, groceries, and consumer goods. This cash back can amount to several hundred dollars per year. Over a decade of using these cash back cards you can receive back literally thousands of dollars in cash back rewards. Found money like this makes a significant impact on your ability to save and spend over time.
Security and Safety Benefits of Good Credit Score
Having good credit can save you in very practical ways too. Your financial health can be easily destroyed (or severely set back at least) by fraud. Good credit will allow you to receive credit monitoring services and alerts provided by credit cards through Bank of America, Chase, Citibank, and Barclays.
You will know if someone is using your identity to open credit cards in a matter of weeks rather than accidentally finding out months or even years later when the damage can be catastrophic.
These credit cards can also provide you with money saving features like mobile phone insurance and car rental collision damage insurance. If your phone stops working within a certain period of time, the insurance will repair or replace it. When you rent a car, instead of needing to pay for the expensive rental collision insurance, you can rest confident that it will be provided by major reward credit cards such as American Express and Chase Sapphire rewards.
This savings by itself can amount to over a hundred dollars with a one to two week auto rental.
The Financial Benefits of Good Credit Score
The financial advantages to having good credit can literally change your financial future. This starts with lower interest rates on loans, car loans, and credit cards and extends to better rates on car leases and mortgages to name a few.
Differences in car insurance rates can be stunning between people with good credit and poor credit.
According to the consumer website NerdWallet, drivers who possess bad credit pay an average of $1,270 more per year in car insurance premiums nationwide. This amounts to nearly $13,000 in savings (for people with good credit) over a ten year period.
The financial benefits of good credit extend to rates and limits on credit cards too. With solid credit scores, you will become eligible for higher reward, high limit credit cards that offer lower interest rates on carried balances. You will be able to participate in lucrative rewards programs that translate to double points for every dollar spent (as with Chase Sapphire).
Good credit will translate to your receiving approval with higher limits on your new cards as well. It can mean access to zero percent interest rate offers on balance transfers from credit cards like Chase Slate (Credit Karma’s top pick for balance transfer offers).
Besides these balance transfer offers, you will be able to qualify to refinance your existing loans (like auto loans and mortgages) at more competitive interest rates through banks.
Having good credit can make a meaningful difference for you financially with cell phones and utilities too. When you apply to start a new cell phone contract, the mobile phone company will quietly check your credit. If your credit score is strong, then you will be able to qualify for a cell phone without having to pay a several hundred dollars security deposit.
Similarly when you apply for electric and water utilities, they will pull your credit to determine if you need to pay a $200 or higher security deposit. These security deposits are more than just a nuisance; they sap away your savings and reserves and pay you no interest.
The savings available to good credit holding individuals seem like they are endless because they really are. As you have already seen, this impacts everything from how much money you will pay to finance a house or a car (for potentially years or even decades) to whether or not you will be able to beat out the competition for a good job.