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Your credit score is a rating of how likely you are to repay money you borrow. If you have a high score, you’re considered to be a low risk as a borrower. Anything above 700 is fairly high — the most widely used scoring systems range from 300 to 850.
Your credit score can affect your life in many ways, and there are many ways a high credit score could save you money. A few benefits, in particular, could save you thousands of dollars.
Better credit card opportunities
When you’re starting out with credit, your credit card options are limited. The cards you’ll be able to get will be light on benefits, and you may need to pay a security deposit just to open a credit card. Most starter credit cards also don’t have much to offer in terms of rewards, bonuses, or other benefits.
With a high credit score, the card options get much better. Credit card companies are interested in earning your business, and they pull out all the stops with their top travel rewards cards and cash back cards. Here are a few examples of credit card features you can get when you have a high credit score:
- Sign-up bonuses worth $200 or more
- High rewards rates on your purchases
- A 0% intro APR to avoid interest charges
- Complimentary purchase and travel protections
If you have a high credit score, ensure you’re taking advantage of it. Click here to see our curated list of the best credit cards and open one today. You’ll find cards with all those features on the list above — and much more.
Lower interest rates on loans
A higher credit score means you can get lower interest rates when borrowing money. But a lot of people don’t realize just how much of a difference it makes.
Let’s look at one of the most popular types of loans as an example: the 30-year mortgage. On a 30-year mortgage for $300,000, a high credit score could save you over $50,000. Here’s a look at mortgage costs depending on your FICO® Score (the most widely used type of credit score by lenders), based on data from MyFICO.
| FICO® Score | APR | Monthly Payment | Total Interest Paid |
|---|---|---|---|
| 760-850 | 6.883% | $1,972 | $410,061 |
| 700-759 | 7.171% | $2,030 | $430,972 |
| 680-699 | 7.311% | $2,059 | $441,224 |
| 660-679 | 7.359% | $2,069 | $444,752 |
| 640-659 | 7.476% | $2,093 | $453,378 |
| 620-639 | 7.604% | $2,119 | $462,858 |
Cheaper auto insurance
In most states, insurance companies are allowed to use your credit score to set your premiums. Drivers with high scores get cheaper rates, while drivers with low scores are punished with more expensive auto insurance. It’s a controversial practice, but studies have found that people with low credit scores file more insurance claims on average.
We’re not just talking about an extra $5 or $10 per month, either. Drivers with poor credit pay over twice as much for car insurance as drivers with excellent credit. Here’s the average amount each group paid for auto insurance in 2023 and the national average, according to data gathered by The Motley Fool Ascent:
- National average: $3,017
- Drivers with excellent credit: $1,947
- Drivers with poor credit: $4,145
Quite a few factors go into your auto insurance rates. But all other things being equal, a high credit score could potentially save you $1,000 to $2,000 or more.
How to get a high credit score
Your credit score is based on your track record of borrowing money. To build credit, you need to borrow money and pay it back on time.
You could do this with either a credit card or loan. Credit cards are generally the better option, because you don’t need to pay interest when you use them. If you pay your card’s full statement balance each month, you won’t be charged interest on your purchases.
Here are a few more tips to follow to build your credit:
- Use a credit monitoring service to keep track of your score.
- Don’t overspend on your credit cards — keep your balance under 30% of your credit limit.
- Always pay your bills on time.
- Review your credit report at least once a year for errors.
It takes a little work to get a high credit score, but the end result is well worth it. Good credit can make life much easier, and as you saw, it can also save you a lot of money.
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