Benefits of Having and Maintaining a Good Credit Score

Benefits of Maintaining a Good Credit Score

Imagine: you buy your dream car with an affordable rate on your car loan, buy your dream home within your budget with an interest rate that is not breaking the bank, land your dream job, or take your dream vacation paid for using credit card reward points. These are just some of the benefits of maintaining a “good” credit score. “Good” credit isn't just about bragging rights (hey, there's nothing wrong with feeling proud of yourself). It's about securing lower interest rates on favorable loans and credit cards, potential landlords and employers seeing you as a reliable and trustworthy individual and building financial security for yourself and your future.

What is a Good Credit Score and How are Credit Scores Measured

First, what makes up a "good" credit score? Generally, a credit score of above 700 is in the "good" range, scores between 600 and 700 considered "fair", and scores 600 and below are considered “poor.” But these numbers aren't arbitrary – there's a science behind them. Three major credit bureaus – Experian, Equifax, and TransUnion – each collect data on your borrowing history, and look at the following factors:

Credit Age: how long you've been using credit or borrowing.

Payment History: whether you make payments on time (avoiding those dreaded "late payments" or "slow pays")

Credit Card Use: how much credit you're using compared to your total limit (also known as utilization, keep this below 30% of your limit)

Total Accounts: the number of individual loans and credit card accounts that are currently open (you want to avoid having too many or too few)

Hard Inquiries: the number of times a lender has checked your credit (too many over a short period of time can hurt your score)

Derogatory remarks: accounts that are in collections or on public record like bankruptcies, civil judgements, and tax liens.

Although all three bureaus collect similar data, they don't all weigh the data the same way. Each has its own unique scoring model, meaning your credit score might vary slightly between them. This highlights the importance of checking all three reports regularly to ensure accuracy and identify any potential discrepancies.

Good Credit Score Affects Interest Rates and Loan and Credit Approval

So how does a "good" credit score affect you? Think of your credit score as a signal of responsible borrowing that unlocks financial advantages and saves you money down the line through lower interest rates and better loan and credit approval odds. Lower interest rates help you pay down your loan or credit card faster, making your debit balance easier to manage. Think of it as a reward for good financial use and judgement – the lower your risk, the sweeter the interest rate deals you'll be offered. A "good" credit score also opens a larger range of loan and credit possibilities. Many of the best credit cards that offer rewards or travel benefits offer better approval odds to those with “good” credit. Loan approval odds also increase with good credit, so if you are planning to buy a car or home in the future or want to open your very own business one day, maintaining a “good” credit score is extremely important. Ultimately, your credit score acts as your financial ambassador, and tells lenders how trustworthy you are and paves the way for better financial opportunities and security.

A Good Credit Score Improves Financial Security

Don't underestimate the ripple effect of a “good” credit score and how this greatly affects your financial security! Remember that 30% utilization target for revolving loans rule? It isn't just about impressing lenders and improving your credit score – it's about keeping more money in your pocket. Maintaining low credit card and loan balances translates to lower interest payments, freeing up funds for savings, personal goals, emergencies, or even just breathing a little easier financially. Think of a "good" credit score as financial armor: building good credit habits shields you from the sneaky traps of high interest and the stress of mounting debt. Also, avoiding those "slow pays" isn't just about keeping your score pristine – it's about preventing financial dominoes from falling. Each delayed or minimum payment can trigger a cascade of late fees and compound the burden of additional interest making it harder to catch up. By prioritizing early or on time payments and paying more than the suggested minimum toward your debt, you sidestep a whole domino effect of financial stress. A "good" credit score quietly strengthens your overall financial security, one healthy habit at a time.

A Good Credit Score Improves Housing and Employment Opportunities

Dreaming of the perfect apartment or owning your own home? Maintaining a "good" credit score is the key! Landlords and lenders both use your credit history as a predictor of your future rent-paying or mortgage-managing skills. A "good" credit score is a financial resumé showcasing your responsible habits. On-time payments and low credit card balances paint you as a reliable tenant, opening doors to your dream home or apartment. When it comes to buying a home, mortgage applications demand confidence from lenders. A "good" credit score assures mortgage lenders you are financially mature and responsible to handle monthly mortgage payments. The benefits of a "good" credit score doesn’t just stop at housing. Some employers peek at your credit report too to establish that you are reliable and trustworthy. Late payments might whisper doubts to potential employers. Remember, your credit score isn't just a number – it's a powerful tool paving the way to secure housing and career-boosting opportunities.

How Westerra Credit Union Can Help You on Your Journey to Maintain a Good Credit Score

At Westerra Credit Union, we believe maintaining and building a "good" credit score is a steppingstone to a brighter financial future. We don't simply stand by and watch our members navigate your credit journey alone. We're here to help you clear a path and empower you to conquer your credit goals. We have a passion for financial education. We believe in understanding your individual financial goals, analyzing your current credit landscape, and equipping you with the tools and knowledge to tackle any credit challenge head-on. Whether you're just starting your credit building journey or a seasoned borrower looking to optimize your credit score, our friendly and knowledgeable team is a phone call or branch visit away. We offer personalized credit counseling, financial workshops, and access to online financial resources. Remember, your credit journey doesn't have to be a solo trek Westerra Credit Union is here to help you!