Do you want to learn how to save money in the long run? With all the resources out there it’s easy to get overwhelmed. There are so many ways you can achieve this, today we are sharing how having a good credit score will save you. This is a great way to stop you from living paycheck to paycheck.
Although there’s no universal credit scoring system, there are many similarities between various countries. The US and Canada have TransUnion and Equifax and a 670 score is considered relatively good. Germany’s credit agency, SCHUFA, advises people to maintain a rating between 90-100%. Meanwhile, India’s CIBIL Score is 300-900, with 750 and above deemed desirable. 79% of approved loans in that country are tied to those high scores. Even in places without numerical scoring, financial opportunities largely rely on equivalent factors.
Why do you need to have a good credit score?
A good credit score can protect you from financial trouble, especially today when there are high inflation rates and commodity supply issues. It also helps you save money, as long as you also continue to spend wisely. Our post on Frugal Living Habits outlines how to stay on track using strategies like financial planning and self-improvement. Combined with the benefits of a good credit score, you’re essentially maximizing your savings.
Here are 7 ways how a good credit score can save you money in the long run:
1. Better credit cards
If you have good credit standing, banks compete for your subscription by offering low annual percentage rates (APR) which is a combination of fees and interest rates. Existing cardholders may even receive zero-interest balance transfer proposals. Both cases entail reduced charges, which saves money.
2. More rewards
Besides offers, you may get credit card features like cashback rewards. Some also provide retail vouchers and discounted travel packages. The amount difference brought by such perks can then go to your savings.
3. Debt consolidation
Debt consolidation means getting a low-interest personal loan to pay off all existing debt, after which you have one balance to cover. It’s generally granted to people with good credit scores.
The report What is Debt Consolidation? from CNBC demonstrates potential savings using the average APR of credit cards and personal loans in America: 16.61% and 9.63%, respectively. $10k credit card debt will have accrued $2,656.53 in interest if paid in three years. Using debt consolidation, the same amount will have an interest of $1,447.90. That’s $1,200 in savings.
4. Flexible loan terms
Loans usually have better terms for holders of good credit scores. You will find these by shopping for the best rates. It’s advisable to do this within a short period since loans typically warrant hard inquiries. The guide titled ‘What’s the Difference Between a Hard and Soft Credit Check’ on Upgraded Points explains that multiple inquiries within 30 days are considered as one request, provided they’re for the same type of loans. By doing this, it lets you compare rates and see which one can give you the highest savings. It’s even more valuable for long-term amortization like 10 years or above.
5. Mortgage savings
Mortgage interest rates for people with good credit scores can be 5% less than those without. The article 7 Advantages of Credit and the Benefits of Building Good Credit on Young and the Invested cites a study illustrating this difference. Those with scores lower than 620 got mortgage interest equaling $486,040 in their lifetime, while those with 760 and above only accrued $88,388. That’s a $397,652 difference.
6. Lower rent
Renters with good credit scores enjoy similar benefits, especially for long-term leases. Since you’re considered a trusty payor, your landlord is more secure that the property will provide income, while you get to save on rent. It’s a win-win.
7. Affordable Insurance
Having a good credit score means you have excellent financial management skills. For insurance companies, that means a lower risk when it comes to insurance claims because you likely have other fund sources. They then offer policies with reduced premiums, thereby providing savings.
As you save due to a good credit score, you also get better financial opportunities. Make sure you grab these opportunities to help you save even more money. It’s a cycle that’s worth forming a habit.
