Credit Scores & Credit Monitoring What To Do About Bad Credit 9 Benefits of Having a Good Credit Score By LaToya Irby LaToya Irby Facebook Twitter LaToya Irby is a credit expert who has been covering credit and debt management for The Balance for more than a dozen years. She's been quoted in USA Today, The Chicago Tribune, and the Associated Press, and her work has been cited in several books. learn about our editorial policies Updated on January 13, 2022 Reviewed by Samantha Silberstein Reviewed by Samantha Silberstein Twitter Samantha Silberstein is a Certified Financial Planner, FINRA Series 7 and 63 licensed holder, State of California Life, Accident, and Health Insurance Licensed Agent, and CFA. She spends her days working with hundreds of employees from non-profit and higher education organizations on their personal financial plans. learn about our financial review board Photo: The Balance / Chloe Giroux You can survive with bad credit, but it’s not always easy and definitely not cheap. Establishing a good credit score will help you save money and make your financial life much easier. If you’re looking for reasons to maintain your good credit, here are some great benefits to having a good credit score. Low Interest Rates on Credit Cards and Loans The interest rate is one of the costs you pay for borrowing money and the interest rate you get is often directly tied to your credit score. If you have a good credit score, you’ll almost always qualify for the best interest rates, and you’ll pay lower finance charges on credit card balances and loans. The less you pay in interest, the sooner you'll pay off the debt, and the more money you'll have for other expenses. Better Chance for Credit Card and Loan Approval Borrowers with a poor credit history typically avoid applying for a new credit card or loan, because they've been turned down previously. Having an excellent credit score doesn’t guarantee approval, because lenders still consider other factors such as your income and debt. However, a good credit score increases your chances of being approved for new credit. In other words, you can apply for a loan or credit card with confidence. More Negotiating Power A good credit score gives you leverage to negotiate a lower interest rate on a credit card or a new loan. If you need more bargaining power, you can take advantage of other attractive offers that you’ve received from other companies based on your credit score. However, if you have a low credit score, creditors are unlikely to budge on loan terms, and you won't have other credit offers or options. Get Approved for Higher Limits Your borrowing capacity is based on your income and your credit score. One of the benefits of having a good credit score is that banks are willing to let you borrow more money because you’ve demonstrated that you pay back what you borrow on time. You may still get approved for some loans with a bad credit score, but the amount will be more limited. Easier Approval for Rental Houses and Apartments More landlords are using credit scores as part of their tenant screening process. A bad credit score, especially if it’s caused by a previous eviction or outstanding rental balance, can severely damage your chances of getting into an apartment. A good credit score saves you the time and hassle of finding a landlord who will approve renters with damaged credit. Better Car Insurance Rates Add auto insurers to the list of companies that will use a bad credit score against you. Insurance companies use information from your credit report and insurance history to develop your insurance risk score, so they often penalize people who have low credit scores with higher insurance premiums. With a good credit score, you’ll typically pay less for insurance than similar applicants with lower credit scores. Get a Cell Phone on Contract With No Security Deposit Another drawback of having a bad credit score is that cell phone service providers may not give you a contract. Instead, you’ll have to choose one of those pay-as-you-go plans that have more expensive phones. At a minimum, you might have to pay extra on your contract until you've established yourself with the provider. People with good credit avoid paying a security deposit and may receive a discounted purchase price on the latest phones by signing a contract. Avoid Security Deposits on Utilities Security deposits are sometimes $100 to $200 and a huge inconvenience when you’re relocating. You may not be planning to move soon, but a natural disaster or an unforeseen circumstance could change your plans. A good credit score means you won’t have to pay a security deposit when you establish utility service in your name or transfer service to another location. Bragging Rights Because of all the benefits, a good credit score is something to be proud of, especially if you've had to work hard to take your credit score from bad to good. If you've never had to experience a bad credit score, keep doing what it takes to maintain your good score. It only takes a few missed payments to start getting off track. Frequently Asked Questions (FAQs) What is a good credit score? There isn't a set number that defines a good credit score, and it also depends on what you're trying to do. The more you want to borrow, the better the credit score you'll need. The average credit score in the U.S. in 2021 was 716, so any score higher than that could be considered above-average. How do you get a good credit score? The components of your credit score (in order of how they're weighted) are payment history, amounts owed, length of credit history, new credit, and credit mix. You can improve your credit score by improving all of these aspects of your finances, but don't expect your score to improve rapidly. Building credit takes time. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Insurance Information Institute. "Background on: Credit scoring." Federal Trade Commission. "Utility Services." FICO. "Average U.S. FICO Score at 716, Indicating Improvement in Consumer Credit Behaviors Despite Pandemic." FICO. "What's in My FICO Scores?"