Benefits Of Good Credit

Just as you feel better about loaning money to a friend who paid you back quickly the first time, your good credit history increases the confidence of your creditors. With a good credit history, you can borrow more money at a lower cost.

Building good credit

If you have no credit history, you might be required to show proof that you paid your rent or utility bills on time.

You can get credit if you are under 18, but your credit history doesn't start over when you become of legal age. That missed car payment when you were 17 will still be on your credit report when you turn 20.

The most important part of a credit history is on-time payments. Anytime a credit history shows several late payments (30 days, 60 days, 90 days or more), a note is added to the report. The creditor may see it as riskier to lend money to people who did not pay their previous debts on time. Credit may be denied or interest rates may increase because of a history of late payments.

Credit mistakes are costly

A person with an impaired credit history may:

Pay higher interest rates
Be approved to borrow less money
Be denied credit

Creditors try to balance the risk of impaired credit by charging higher fees or prices. This is called risk-based pricing.

Keep in mind that if you have a good credit history, you'll pay lower interest rates and have more financial resources in the future. If you have a poor credit history, the opposite is true. Over time, you will have spent thousands of dollars on interest that could have been put in a savings account or other investment.


 

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