A good credit score may help you get lower interest rates on loans, higher credit limits, reduced insurance costs, and even smaller security deposits for utilities and housing.
Those are only a few of the potential perks of good credit. In general, a strong credit score could open doors to a lifetime of financial opportunities.
To explain the benefits of a good credit score, we’ve broken them down into 10 key areas of impact. Check them out to see how good credit help set you up for a brighter financial future.
Table of contents
- What is a good credit score?
- What are the advantages of a good credit score?
- How to use good credit?
- How can you find your credit report?
What is a good credit score?
A good credit score is anything above 670, while anything lower than that may be considered fair or poor. Your credit score is a three-digit number that gives lenders an idea of your creditworthiness, or how likely you are to pay your bills on time. Credit scores are based on your credit history as shown in your credit reports. Generally speaking, lenders see a borrower with a higher credit score as being less risky when it comes to paying back a loan.
FICO® Scores* are the most widely used scores and are divided into five ranges. The higher the number, the more creditworthy you are in the eyes of lenders. The five FICO® credit score categories are listed here from “exceptional” to “poor”:
- Exceptional—800–850: This is the highest rating and may qualify you for the best credit products with the lowest interest rates.
- Very Good—740–799: Borrowers with scores in this range are considered very dependable borrowers. Their credit reports show that they handle debt well and are rarely late with payments.
- Good—670–739: Credit scores in this category indicate that the person is a reliable borrower but might not have a long credit history or may have minor issues in their payment history. The average credit score of Americans is 714.
- Fair—580–669: This rating may indicate to lenders that a consumer has high levels of debt or might have had difficulty in the past making payments on time.
- Poor—300–579: A credit score in this range may make it difficult for someone to borrow money. If a loan is approved, it might be expensive and carry a high interest rate.
What are the advantages of a good credit score?
A higher credit score may indicate to lenders that offering you credit carries a lower risk. By increasing your score, you may have more opportunities to build financial momentum and fully achieve your financial goals. We’ve listed 10 top ways a good credit score might help.
1. Easier credit approvals
If you have a good credit score, banks and other lenders may be more likely to approve applications for credit cards, mortgages, and other loans. A higher creditworthiness may allow you to access the financial resources you need without delays or extra steps.
2. Higher credit limits
Because a good credit score can signal to lenders that you’re a reliable borrower, it may help you get larger credit limits on credit cards and loans from banks. With higher credit limits, you might enjoy stronger purchasing power and financial flexibility.
3. Lower interest rates
With a good credit score, you might be eligible for lower interest rates on credit cards and many types of loans, including personal loans, auto loans, and mortgages. Lower interest rates may add up to big financial savings over the long term. While a higher score may help with a lower interest rate, it doesn’t guarantee it since lenders take in many other factors when determining your rate. With Discover, you can see what your loan rate and set regular payment could be before you apply, with no impact to your credit score.
4. More choices when applying for a loan
Having a good credit score might give you more options when comparing loan terms, rental agreements, discounts, and other perks. For example, if you pre-qualify with multiple mortgage lenders, you can try to negotiate with your preferred lender to lower your interest rate or waive loan fees to win your business. When making your decision, be sure to compare approved offers, APRs, fees, terms, and total cost before you borrow.
5. Better car insurance rates
A good credit score may help you save money on car insurance, homeowners' insurance, and other types of insurance. Insurers may consider your credit history and credit score when determining your premium. The availability of this can vary by state and insurer though, so be sure to understand your potential insurance rates before signing.
6. Lower security deposits for utilities
If you have a good credit history, some utility companies, such as internet providers and cable companies, might not require a security deposit before starting service. Without a strong credit score, you may need to get a letter of guarantee showing that someone will pay your bill if you’re not able to.
7. Cell phone accounts without prepaying
Telecom companies may consider your credit score when you open a new account. A higher credit score might help you get financing from the company and receive other favorable terms.
8. More credit card rewards
Borrowers with high credit scores often have access to better credit card rewards, such as invitations to exclusive events and generous mileage, hotel, and other points. These plans may be marketed primarily to candidates with stronger credit histories.
9. Improved offers for mortgages and leases
A good credit score may open the door to more housing options by helping you get approved for a low-interest mortgage or making it more likely for landlords to approve your lease application. A good score may also mean that you don’t need a co-signer for your lease, or to pay a large security deposit up front.
10. Better position for your financial future
In general, a good credit score may position you for a wide range of attractive options and help lead you on a path to financial stability. Becoming financially stable might also help you manage unexpected expenses and stay focused on your future.
How to use good credit?
A good credit score may unlock better financial opportunities and even save you time and work. With a good score, you could shop around for lower interest rates on loans and credit cards, higher credit limits, and faster approvals for things like mortgages or vehicle loans.
If you’re planning to borrow money, you should always review your credit report, check your available score, and use a payment calculator to understand what your monthly payments could be.
How can you find your credit report?
You can obtain your credit reports for free at AnnualCreditReport.com. You may be able to check your credit score elsewhere.. Many lenders offer customers free access.
We can help you learn about reading your credit report and how regularly checking your credit report could help you plot a path toward your financial goals.
Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.
The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Discover, a division of Capital One, N.A., or its affiliates.
* FICO® is a registered trademark of Fair Isaac Corporation in the United States and other countries.