Friday, 2 April 2010 17:06
Most people realize that having good credit makes it easier to get loans or credit cards. Were you aware that having good credit can also save you quite a bit of money?
For starters, lenders generally give lower interest rates to people who have better credit. Think a lower rate isn’t a big deal? Take a look at two people who buy identical $22,000 cars with 60 month terms. The person with a credit score of 640 will pay 7.49 percent interest, for a monthly payment of $441 – while the one whose credit score is a healthier 725 pays just 4.49 percent, for a monthly payment of $410. Over the life of the loan, the person with the lower credit score will pay $1,860 more.
That difference is even more dramatic when it comes to home loans. On a $165,000, 30-year fixed-rate mortgage, our friend with the 725 score will pay $107,234 less than the person with the lower score. And, because the higher score means a lower monthly payment, the person who scored 725 will have more money on hand after paying bills.
Credit cards are another place where having good credit can pay off. People who have earned high credit scores by using credit wisely can qualify for credit cards with lower interest rates, higher credit limits, and other money-saving features such as no annual fees. That can save them several hundred dollars over the course of the year.
Good credit can lower your insurance bills, too. Insurance companies frequently use credit information to determine what premiums to charge, because their experience shows that people with poor credit may be greater risks for claims. If you have high-quality credit, you may be able to qualify for much lower premiums and better policies.
Credit can affect your well-being in other ways. For example, renters whose credit is solid may be able to qualify for the most desirable homes and apartments. Many landlords will turn away prospective tenants with poor credit histories, or ask them to pay larger deposits. In addition, a growing number of employers review job applicants’ credit scores as a measure of character and reliability. The better your credit history, the better your chances of getting a good job.
Simply put, it pays to establish and maintain good credit – and if your credit record isn’t as good as it should be, improving it will provide many benefits.