The hidden gates your credit score can unlock

If you’re familiar with your credit score and how it works, you might think that you only need to think about it when you’re applying for a credit card or taking out a loan. However, there’s more than meets the eye to your credit score – namely, the opportunities it can unlock for yourself and your finances.

From better insurance rates, to exclusive deals to a cushier living situation, here are a few of the ways a higher credit score opens unique perks for you and your finances.

Better interest rates

Lenders like to attract – and reward – borrowers with high credit scores since they’re less likely to default on their loans or miss payments.

While lenders will generally have a minimum credit score for you to qualify (alongside income and debt-to-income ratio requirements), having a higher credit score can net you a lower interest rate and monthly payment.

Let’s say you’re applying for a $250,000, 30-year fixed-rate mortgage. If you’re qualified with the minimum credit score for a traditional mortgage – 620 – on average, you’ll be offered an APR of 7.969 percent as of January 2024. With that rate, you’ll have a $1,829.01 monthly payment and pay $408,444 in interest over the lifetime of the loan.

A credit score of 760 or higher, on the other hand, will get you an APR of 6.38 percent. That’s a $1,560.49 monthly payment and a total of $311,777 in interest paid over 30 years – nearly $100,000 less in interest, just for having a better credit score.

Better insurance rates

Lenders aren’t the only ones looking at your credit score. Car insurance companies will offer you lower premiums if you have a good credit score because it indicates you’ll reliably make payments on your account.

While your premium will be based on a variety of factors such as your driving history, the insured vehicle and previous claims, you can save a lot of money by having a high credit score when you apply for insurance.

On average, drivers with a poor (580 and under) FICO score pay, on average, $4,801 per year. Having a good credit score (between 670 and 739) will cut your annual premium to $2,543, while an excellent score (800 and up) will net you an average annual premium of $2,200 – less than half of what having a poor credit score can get you.

A better apartment

If you’ve ever applied for an apartment or rental home, you may have had to give the landlord or property management company permission to run a credit check.

Rental companies will use your credit history, alongside your income and rental history, to grant approval for your application. While there are rentals you can apply for that don’t require a credit check or that you can qualify for with bad credit, you’ll have more options if you have a better credit score.

In a competitive rental market, having a good credit score can help you find a unit in the area you want and with a rent that matches your budget instead of having to limit yourself because your score doesn’t meet the minimum.

More house

If you’re purchasing a home, having a good credit score can not only save you on interest but increase your overall purchasing power.

This applies in a few ways. With a lower interest rate, you can save on closing costs with your lender, which can free up more cash to contribute to your down payment and give you more purchasing power.

For example, a lower interest rate means that you may be able to avoid mortgage points, where borrowers can purchase down their mortgage rate by paying an upfront fee.

Mortgage points typically cost one percent of the mortgage to lower the interest rate by .25 percent – meaning that if you want to lower your mortgage APR from 8.00 percent to 6.25 percent on a $250,000, you’ll be paying $17,500 extra in closing costs.

Having an excellent credit score can lower your APR from 7.969 percent to 6.38 percent – no points needed.

You’ll also save on your per diem, or the daily interest you pay the lender at closing. Per diem interest reconciles the interest that will accumulate on your loan between closing and the date of your first payment and is paid as part of your closing costs.

Let’s say you have 20 days between closing and your first mortgage payment on a $250,000 mortgage. With a 7.969 percent APR, your per diem will come out to about $1,091.64 in per diem interest that you have to bring to the closing table. A 6.38 percent APR, on the other hand, will only cost you only $873.97 in per diem.

Finally, a lower interest rate can lower your monthly mortgage payment, giving you the ability to borrow more money and buy more house.

Let’s say you have a $100,000 household income and a down payment of $50,000. With a 7.969 APR, you’ll be able to afford a $2,333 monthly payment on a $368,934 home with a 30–year mortgage.

With a 6.38 percent APR, however, your principal will go farther with each monthly payment – meaning with that same $2,333 monthly payment, you can afford a $423,814 home.

A better job

If you’re on the hunt for a job, your credit score can make or break your application.

Employers may conduct a credit check on potential employees to see if they have a history of being reliable and trustworthy. While your employer won’t see your credit score directly, a credit history full of missed payments and defaults may land your application in the rejection pile.

If you want to start a business and become your own boss, you’ll likely need to take out a business loan down the line. While businesses can have their own credit score, if you’re starting out, lenders will look at your personal credit score. The higher your score, the more likely you’ll qualify – and the better interest rate you’ll get.

Exclusive card deals

Credit card companies, like lenders, want to work with customers who have a history of making their payments and paying off their balances. Because of this, they’ll incentivize clients with good scores by offering high-end rewards and perks for cardholders.

While most credit cards offer some form of reward, such as a small cash back or rebate with each purchase, individuals with excellent credit can access top-tier rewards.

This can include higher cash back amounts, point rewards on purchases that can be redeemed for discounts and rewards such as gift cards, airline miles, welcome bonuses and other perks such as luxury lounge access and priority seating with certain airlines.

You’ll also be more likely to qualify w for a no-interest balance transfer credit card, which offers a zero percent introductory rate on card balances you transfer to the card. If you need to borrow money or have a card balance you aren’t able to pay off in full, you can take advantage of the introductory period and avoid accumulating interest on your balance before paying it off, saving you money in the long run.

Having a good credit score is like having a good reputation – and when word gets out, lenders will want to work with you. Credit card companies can send prescreened offers in your mail and email, connecting you with cards that you qualify for with your credit score.

More peace of mind

Having a good credit score can give you a financial backup, granting you some peace of mind.

Since you’re saving money on interest and premiums, you’ll have more money to dedicate to expenses or building up your savings. If you have to take out a loan to pay for an unexpected expense, you’ll be more likely to qualify with lenders. You can also use a balance transfer card to avoid accumulating interest until you can pay off the balance.

A lower credit score has also been linked to mental health struggles. Missing payments, carrying too much debt and facing bankruptcy have been linked to stress, high blood pressure, cardiovascular issues and more.

Your credit score can even impact your love life. A study from the Federal Reserve Board found that couples with similar credit scores tended to stay together more than those with large gaps between their credit scores. Having a similar credit score can also mean you’re on the same boat when you combine your finances, apply for a mortgage together or open up a joint banking account.

Finally, having a good credit score can be a source of personal pride for your finances. A high credit score indicates that you have a good mix of credit, are on-time with your payments and that you’ve avoided delinquency on your accounts – all factors that can contribute to your financial stability.

Unlocking better opportunities with Lexington Law

If your credit score is less than ideal, it’s natural to want to unlock the exclusive opportunities available to those with an excellent score.

While you can fix your credit by making your payments on time and paying off your balances, if your score is on the lower end, then you might want to give your credit history a good, hard look for inaccurate claims and discrepancies.

This is where Lexington Law comes in. With a team of lawyers, paralegals and credit professionals who work directly with all three credit bureaus to ensure your credit report is accurate, Lexington Law can help clean up your credit report by disputing false information on your credit history.

When you apply, Lexington Law’s team will pull your credit history and comb through it to verify that each and every detail is accurate. Items such as old balances, inaccurate payment dates, wrong addresses and missing information can easily drag down your score – which is why it’s important to get them off your history as soon as possible.

Lexington Law will also help you monitor your credit, so you can keep an eye on any new transactions, watch your score grow and make sure there aren’t any unexpected or unauthorized entries on your report.

If you’re interested, Lexington Law offers a free credit assessment online to help you see where your score stands and where your credit report can be disputed and repaired.

The bottom line

A cleaner credit history and an excellent credit score can unlock multiple opportunities for you. Not only can you have thousands of dollars in interest and insurance, but you can also improve your living situation, get a great credit card and gain a little more peace of mind around your finances.

If you’re looking to clean up your credit history and enjoy the benefits of a high score, consider working with Lexington Law firm. With expert help and a proven dispute process, you can challenge negative items on your credit report and begin your journey to getting a high score – with all the perks that follow.