Hidden Benefits of Excellent Credit Score
What is an excellent credit score?
What will be classified as excellent credit score will depend on the credit rating agency’s score you are considering. If you have credit score of 800 and above based on FICO ranking, you will be said to have excellent credit score. This may be slightly different with Vantage Score. If you have Vantage Score of 750 and above, your credit score will be considered excellent. What of if your credit score is lower? Does it mean that your credit is bad? Not really. There are still other classifications. For FICO Score, if your credit score is in the range of 740 and 799, that means your credit score is very good. People with credit score between 670 and 739 are said to have good credit score while 580 – 669 and 300 – 579 are fair and very poor credit score respectively.
Do you have excellent credit score? If you are, I say congratulations! It actually takes a high level of discipline to have excellent credit score. Without you telling me, I know that you must have been paying your credit balance promptly. You must have maintained low credit utilization while you equally have a long credit history and you keep no or low balances on your credit card among others. Having excellent credit score is good. But the question that I want to ask you is; are you making most of the excellent credit score? What benefits do you derive from it? Or is it just a number to you? In this article, I will give you insights on some benefits you can enjoy with your excellent credit score.
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Benefits of Excellent Credit Score
Large Line of Credit: It is common among people with excellent credit score to have low credit utilization ratio. That is fine. But you don’t necessarily need to deny yourself of using your credit card to make essential purchases in an attempt to keep your credit utilization ratio within the reasonable and acceptable level. Your excellent credit score can actually qualify you for increased credit limit. If you approach your credit card and make a request that you will like to increase your credit limit, they may likely grant you the request. Higher credit limit will allow you to spend more with your credit card without overshooting your credit utilization ratio.
Negotiation Power: Excellent credit score is a good proof that you are credit worthy. This makes your risk profile to be low to lenders. Lenders have nothing to fear as you have lengthy payment and credit history. If you want to apply for a loan, don’t settle for the popular interest rates. You can negotiate for lower interest rate. A one percent reduction in interest rate can save you a lot of money especially on mortgage loan that may likely involve large amount and long duration.
Mortgage Refinancing: You will agree with me that your excellent credit score did not come overnight. Before you can have excellent credit score, you must have good payment and credit history. It is possible that you got your mortgage loan when your credit score was not as good as it is now. If your credit score has changed significantly, you can take advantage of this to refinance into a lower interest rate mortgage.
Debt Consolidation: Do you have loans on which you are paying varying high interest rates? If you have excellent credit score, this may be a good time to consolidate the loans into one. What this means is that, you will be taking one new loan with better terms to pay off the existing loans with high interest rates. The benefit of this is not just on the lower interest rate you will be paying. It makes life easier as you don’t need to remember different due dates in order not to miss payments.
Access to Special Credit Cards: Apart from regular credit cards, there are other credit cards that offer special benefits to the card holders. For examples, there are 0% introductory APR credit cards. This type of card is good for use especially when you want to make a large purchase which you will need to pay over a period of time. In fact, this can be a double benefit if you are getting discount on your purchase while you are also not paying interest on your credit card balance. However, you need to ensure that you pay off your credit card balance before the expiration of 0% introductory APR period. Otherwise, it will result to paying hefty interest rate that is even above the regular rates. Other credit cards you can take advantage of are travel reward cards and cashback credit cards.
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Cheap Insurance Rates: Having excellent credit score is not a guaranty that you will pay cheap insurance rate. You should be ready to shop around and make case for your excellent credit score. Shopping around will allow you to get different quotes and compare them. Then, you will be able to choose the one that provides adequate coverage at a good rate.
How to get excellent credit score
If you ask anybody, he will tell you that he wants to have excellent credit score. But you need to understand that you may not be able to achieve this overnight. As they say, Rome is not built in a day. It may not be enough just to ensure that you use your card responsibly. You need to be patient with yourself. You need a good length of payment and credit history to have an excellent credit score. But if you already have reasonable length of credit and payment history, you may be able to increase your points by adjusting the way you use your credit card. For instance, some people make the mistake of maxing out their credit card. They believe that as long as they pay off their card balance at the end of each month, their credit score will be intact. This is a myth. The fact that you have certain credit limit on your card does not mean that you should utilise all the credit. If you want to build your credit score with your credit card, you should endeavour to keep your credit utilization low. In fact, it is suggested that your credit utilization ratio should be kept below 30%. What is credit utilization ratio? It is the expression of your card balance as a percentage of your credit limit. That is, your credit card balance divided by your credit limit multiplied by 100.
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If you are the type that charge almost all your purchases against your credit card, there is probability that you may max out your card. If you know that you can’t stop charging your purchases to your credit card, you have the option of increasing your credit limit to the level that will accommodate your spending without exceeding the acceptable credit utilization ratio. Alternatively, you can pay off significant part of your credit balance before the end of the monthly billing cycle. Your card issuer will only report the balance on your card at the end of the billing cycle to the credit bureaus and not your total spending during the month. This is a secret which some card users don’t know. This is a good method you can use to quickly improve your credit score within a short period. So, if you already have a very good credit score, this approach can change your credit status to excellent credit score.