Having “Good Credit” can be a key to improving your lifestyle. It can help you…
- Get better rates on loans and credit cards – That means you can spend less on the same big item! (See the scenario below.)
- Have an easier time renting an apartment in the Pensacola area
- Earn better car insurance rates from local and national lenders
- Avoid deposits on utility bills
Here’s an example of why your credit score is so important:
If you have a credit score above 760, your interest rate would be about 3.3%. Your payments would be about $292/month. Over the lifetime of the loan, you pay $516 in interest on that loan.
But, if your credit score is 620-639, your interest rate would be 13.8%. Your payments would be $341/month. Over the lifetime of the loan, you pay $2,268 in interest.
That’s more than $1700 more than the person with better credit!
If you want to play around with other loan scenarios, check out the MyFico.com calculator.
In order get good “Good Credit” you must have a good credit history and money in the bank.
- Have borrowed money before – credit cards, furniture loans, car loans, etc?
- Been responsible paying it back – consistent, on time payments?
And do you…
- You have the ability to pay in the future – money in the bank, employment?
- You have collateral if you cannot pay – assets, cars, house, etc?
Building good credit requires discipline. If you do not have a consistent income and are able to pay off what you spend, getting a credit card or loan can RUIN your credit score. This can have a long term effect on your buying/borrowing power.
So, here’s the catch! If you need good credit to get good credit… how do you build credit for the first time? Check out these great options from MoneyUnder30.com.