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Credit Reporting

Key advantages of a strong credit score

You have a lot of numbers to remember—phone numbers, the key code to your front door, your debit card PIN. But one of the most important numbers, your credit score, might be one you don't know off the top of your head.

What is the benefit of having a good credit score? It's not just about credit cards and loans. Everything, from where you live to your chances of landing that dream job, could rest on that three-digit number.

Find out why you should care about having a high credit score and how it could impact your life.

Hear yes more often

Lenders want to give you money. That's how they make a profit. But they also want to minimize their risk. That profit goes out the window if you don't make your payments.

A lender or creditor needs to know they can trust you. Your credit score is an easy way to gauge how much they can trust you with their money.

When you have a high credit score, you're a lot more appealing to lenders. That means you'll likely get more approvals, whether you're looking for a loan or a credit card. Those credit opportunities open you up to more options, from buying a house to undertaking a major home remodel.

Plus, lenders could even try to lure you. More companies who want your business can mean better deals for you.

When your credit score isn't so appealing, you might get stuck with fewer choices. Many lenders don't offer options for people with lower credit scores.

Earn higher borrowing limits

Whenever you want a financial institution to lend you money or extend you a line of credit, one of the first things they'll do is check your credit. Financial products like loans and credit cards have different minimum credit scores to even be approved.

But that's not the only way your credit score affects your borrowing power. A high credit score can determine how much you can borrow. Lenders are more willing to hand over higher amounts of money if you have a solid track record of paying back debts on time.

When your credit score is high, you're more likely to get approved for higher loan amounts and available balances on credit cards. That doesn't mean you should go crazy and borrow the maximum amount. But it does give you a lot more flexibility when it comes to choosing a house you want or borrowing money for a major project.

Score better interest rates

It might seem like creditors throw a dart at a board to assign a random interest rate to accounts, but it's actually based on you. Your credit history and score show the lender how trustworthy you are with paying back debt.

When you're less of a risk, they'll give you better interest rates. That means you'll pay a lot less over time for your debt.

You might also get special 0.00% introductory rates, or other perks on credit cards like interest-free payments. Those can make your larger purchases easier on the budget by letting you spread out payments without extra costs.

Soak up those extra credit card perks

How do free air miles sound? What about cash back on your purchases? Credit card companies often reward you with nicer perks when you show you can handle your money well.

The credit cards with the best rewards are usually reserved for people with the highest credit scores. You might just find yourself sipping tropical drinks on the beach during a fully funded vacation thanks to all those rewards.

A higher credit score opens the door to more reward credit cards. Think about the most beneficial perks when looking at your options.

Use it as a bargaining chip

What is the benefit of having a good credit score when you go to the negotiating table? Lenders and sellers are usually more willing to work with you if you show that you handle your money well.

That negotiating power often starts with getting a preapproval for a car or home purchase. The seller knows you're serious and can get the funding to back up your offers. They might be more willing to come up with an amount that works for both of you.

Being a model borrower can also help you negotiate the terms of your loan. A lender will be more willing to work with you if you have a solid credit history.

Hoping for a lower interest rate? Your high credit score could give you some wiggle room.

Or maybe you want to extend your loan out longer, make a smaller down payment, or modify the deal in some other way. Lenders might give in to those requests when you have a high credit score. They want you as a customer so they might work with you on the deal to make it happen.

If you just barely qualify for a loan, you're probably going to have to accept the terms, high interest rates and all. You don't have much to use as a bargaining chip, so you might be stuck with what they offer.

Enjoy better insurance rates

Why is it important to have a good credit score when you need insurance? Your credit score is usually part of the equation when an insurance company looks at the risks of insuring you.

People with lower credit scores could get denied coverage from some picky companies. When you have a high credit score, you'll likely get better insurance rates.

Why does your credit score matter when it comes to insurance? It's not a matter of whether or not you'll pay your insurance premiums. Credit-based insurance decisions help the company guess how likely you are to make a claim. The idea is people with higher credit scores tend to have fewer accidents, resulting in fewer claims.

Even though the point of insurance is to be there when you have a claim, they want low-risk customers who are less likely to file a claim.

Your credit score isn't the only factor in coming up with your insurance rates. The company also looks at things like your driving record and claims history.

Skip the security deposits for some accounts

Charging a deposit for certain services is common, but you might get lucky and get to skip the upfront money if you have a high credit score. Some utility providers, like gas or water companies, charge deposits when you start your service with them if you have bad credit. If you have fuel delivered, you might have to pay upfront instead of making payments on the deliveries.

Sure, you'll get utility deposits back when you move, but it's a lot more convenient to get the hook-up without being on the hook for an extra deposit in the beginning.

Cell phone companies could also use your credit score to decide whether or not to charge you a deposit. The company might ask you to pay up with a deposit or prepayment for services if you have a lower credit score.

It could also affect your phone options. Many providers let you make payments on expensive smartphones. But qualifying for the payment plan could depend on your credit score, so you could have to pay the full amount upfront.

Move on up to better housing options

Looking to rent a place? You have a better chance of landing that sweet pad you really want if you have a high credit score. That's right—your application approval could hinge on your credit score.

Landlords want as little risk as possible. You're a lot more attractive as a renter if they think you'll pay rent on time every month.

How do they know if you'll pay? Unfortunately, there's no crystal ball to give them that answer. But they can look at your past habits and predict what will happen.

If you have a strong credit score, it shows you have a history of paying on time and keeping up with financial obligations. That's just the kind of person a landlord wants as a tenant.

Even if you pass the credit check, what the landlord sees on the report could impact your rental. You could still qualify with a lower score, but the landlord might ask for a bigger deposit or charge extra fees. Keeping your credit score high can score you the rental you want at a lower upfront cost.

If you're ready to buy, your credit score impacts your mortgage options. You'll likely get approved for a larger loan with a lower interest rate if you have a high credit score. That can open up entire neighborhoods that might be out of reach with a lower credit score.

Land that dream job

Picture this: you found your dream job, applied, and wowed the interview team. Next step? Background checks, reference checks, and credit checks. That defaulted student loan or past-due credit card could put your job offer at risk.

What is the benefit of having a good credit score when you're on the hunt for a new job? Some companies do an employer credit check as part of the screening process before they give you an offer. It's common if the job requires access to money, consumer data, or proprietary information.

Poor personal money handling could increase the chances of an employee committing theft or fraud. It could also show that you're not very organized and could mishandle finances for the company.

If your credit history doesn't add up, they might skip you and hand your dream job to the next-best candidate. The employer doesn't see your actual credit score, but they can see things like your payment history and available credit.

What's your credit score?

Listen, it can be scary to check your credit score, especially if you've had some blemishes in your financial past. But ignoring the numbers won't make them go away.

Checking your credit score gives you a starting point. It helps you understand where you are and lets you track your progress.

Learning your credit score can also be a motivator to boost your numbers. Simple things like paying on time consistently, building credit with a secured credit card like the Varo Believe Credit Card, and lowering high balances can help.¹

Credit score standards according to Varo

What's in a number? Checking your credit report can be confusing. Understanding what qualifies as a good score helps. Here's a general guideline that can help you see how your score stacks up:

  • Excellent: 800 to 850

  • Very good: 740 to 799

  • Good: 670 to 739

  • Fair: 580 to 669

  • Poor: 300 to 579

Even small jumps in your credit score could bump you up to the next range, which could give you even more financial perks like better interest rates.

Taking control of your financial future

So, why is a high credit score good? Your credit score can have a big impact on your financial freedom. But that doesn't mean you're doomed if your score is lower than you want.

Credit scores change all the time. That missed payment last month probably dropped your credit score a few points this month, but that doesn’t mean you can’t climb up to the peak of creditworthiness with a higher credit score. Being consistent and making good financial decisions makes a difference.

Before long, you could be enjoying sweet credit card perks, lower interest rates, and easy approvals from all the landlords in town.

1To be eligible to apply for the Varo Believe Card, you need to have received Incoming Deposits of $200 or more in the past 31 days to your Varo Bank Account and/or Savings Account. Incoming Deposits include any deposit into your Varo Bank Account and/or Savings Account from any source outside of Varo, Varo to Anyone transfers between Varo customers, and final dispute credits. After three months of timely payments on theBelieve card and no late payments on other credit, Varo Customers who had an existing VantageScore® 3.0credit, on average, saw an increase in that score of approximately 42 points. Individual results may vary, and some customers may not see a score increase.

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