how-to-raise-credit-scores

5 Perks You Can Land If You Have Great Credit Scores

Everyone loves earning perks, benefits, and bonuses, right? Credit card reward programs, brand loyalty programs, and even grocery store discount cards are built upon this very concept. Yet while most people can easily recognize the value of a credit card rewards program, there are still many consumers who do not see the value of having high credit scores in the same light. That is a costly mistake.

The truth is that great credit scores can help you to land a lot of awesome perks. Check out the list below and learn more about some of the benefits you can enjoy by maximizing your credit scores.

1. Saving with Lower Insurance Premiums

When you have excellent credit scores you can often secure lower insurance premiums. You may not be aware of this fact, but insurance companies routinely check credit scores whenever you apply for a new auto or home insurance policy. In fact, when it comes to auto insurance pricing, your credit scores might even be more influential than your driving record itself.

Earning great credit scores often pays off every single month in the form of money saved on insurance premiums. If your credit has improved since you took out your current insurance policy, it might be advisable to speak with your insurance agent or perhaps shop around to see if you now qualify for a better price on insurance coverage.

2. Saving on Deposits

When you open a new utility account it is often common practice for the utility provider to check your credit in order to determine whether or not you will be required to put down a deposit for service. As a result, when you apply for new electric service, gas service, cable service, or internet service, having less-than-stellar credit scores can cost you. Additionally, when you apply for a new mobile phone account, your credit will typically be consulted not only to determine whether or not you will be required to put down a deposit for service, but also to determine whether or not you qualify for a new account at all.

3. Saving Interest Fees Every Month

Did you know that financing a home with a questionable credit rating could realistically cost you tens of thousands of dollars over the course of the loan? For example, purchasing a home with a credit score of 620 could cause you to pay an extra $235 per month on a $300,000 mortgage compared to what someone with a credit score of 740 would likely pay for the same loan. Over the entire course of a 30 year mortgage that is an extra $84,600 you would pay - a pretty expensive penalty for not having great credit scores.

If you have already overcome credit issues and have rebuilt great credit scores, you should probably take a look at your current loans (i.e. mortgage, auto, credit cards, personal loans, etc.). You might qualify to refinance some of those loans at a lower rate and save yourself a bundle on interest.

4. Saving on Vacations

Having great credit enables you to land better credit card offers. Many credit cards offer exciting perks such as 0% interest on purchases for 12 months, generous airline reward miles which can be redeemed for free airfare, or even 0% financing with a specific resort or cruise line. However, the most attractive credit card offers are generally reserved for those consumers who have excellent credit scores. Achieving excellent credit scores can open the doors for you to cash in on some amazing vacation deals.

5. Saving Face

If you have ever applied for financing in the past and been turned down, you can probably recall a vivid memory of the red hot embarrassment which crept its way up your face when you heard the words, "I'm sorry, but your application was denied." Simply put, bad credit can be very bad for your self esteem and your sense of self worth, especially if you are the primary bread winner for your family. It is well worth the hard work required to build better credit scores just for the pay off of the added confidence you will receive once you know you never again have to worry about being turned down due to credit problems.

Earning Better Credit

It is completely possible to start earning better credit right away. However, just because it is possible does not mean that the process is easy. Earning better credit takes a solid plan, hard work, consistency, and patience. The good news is that the sooner you get started, the sooner you will be able to achieve your goal. It may require some hard work to improve your credit, but the amazing payoffs above make it totally worth the effort.  


michelle-black-credit-expert.jpg

About the Author: Michelle Black is an author and leading credit expert with over a decade and a half of experience in the credit industry. She specializes in the areas of credit reporting, credit scoring, identity theft, budgeting, and debt eradication. She is featured monthly at credit seminars, podcasts, and in print. You can connect with Michelle on Twitter and Instagram.

What Is Revolving Utilization and Why Is It So Important to Your Credit Scores?

If you want to have great credit scores then pay your bills on time every month. The previous statement is great advice; however, it is incomplete. Simply paying your bills on time is not enough to achieve and maintain great credit scores. In fact, only 35% of your FICO credit scores are based upon your payment history. The other 65% of your FICO scores have nothing at all to do with how timely you pay your bills.

30% of your FICO credit scores, plus a significant portion of your VantageScore credit scores, are calculated based upon information found in the "Amounts Owed" category of your credit reports. The primary factors considered within this category are largely based upon those little pieces of plastic you carry around in your wallet: your credit cards.

What Is Revolving Utilization?

Revolving utilization is a term used within the credit world to describe how much or rather what percentage of your credit card limits are being used. Your revolving utilization ratio is also known as your debt-to-limit ratio or your credit utilization ratio. It measures how much of your credit limits are in use on each of your credit card accounts and expresses that calculation as a percentage. Here is a quick look at how revolving utilization is calculated.

Credit Limit: $5,000
Balance: $3,500
Revolving Utilization: Balance ($3,500) Divided by Limit ($5,000) = Revolving Utilization (70%)

Why Is Revolving Utilization Considered in Your Credit Scores?

Your revolving utilization is an important consideration in your credit scores for one very simple and important reason: it is statistically predictive of higher credit risk. When you carry outstanding credit card debt on your credit reports you represent a higher credit risk than someone whose reports show paid off credit card balances.

All debt is not created equal. When you take out a mortgage loan or an auto loan, for example, you are opening an installment account. Credit cards, by comparison, are revolving accounts. Installment debt is much less risky for lenders to extend because the debt is generally secured by some sort of collateral (aka your house or your vehicle) which the lender can seize and resell in the event you stop making your payments. However, credit card debt is different.

Because of the nature of credit card debt, it is much more predictive of increased credit risk than installment debt. Think about it. If you begin to struggle financially due to an illness, divorce, job loss, or even poor financial management habits like overspending, which is the first obligation you will probably allow to slide in the event that you have more bills than money at the end of the month? Most likely you will not skip your mortgage payment, your rent, or your auto loan payment if you can help it. Credit card payments, however, are much more commonly skipped in the event of a financial shortage.

Additionally, increased credit card balances might indicate that a financial problem is looming. If a consumer loses his job then it is very common to rely upon credit cards to help finance every day expenses until a new source of income can be secured. As you can easily see, if your reports show that you are revolving balances on your credit cards from month to month, especially high balances when compared with your credit limits, it might make you appear to be a higher credit risk in the eyes of a lender.

The Good News

Although revolving unpaid credit card debt on your credit reports from month to month will almost certainly lower your credit scores, you can currently regain those lost points rather quickly, as soon as you start to eliminate the debt. The other goods news is that the score increase you may be eligible to earn from paying down your credit card balances and lowering your credit utilization can be earned incrementally (instead of an "all or nothing" scenario). In other words, as you pay down your credit card balances little by little you should begin to experience small credit score increases. You do not have to pay a credit card balance all the way down to zero on your credit reports before you can hope to receive a score boost.


michelle-black-credit-expert.jpg

About the Author: Michelle Black is an author and leading credit expert with over a decade and a half of experience in the credit industry. She specializes in the areas of credit reporting, credit scoring, identity theft, budgeting, and debt eradication. She is featured monthly at credit seminars, podcasts, and in print. You can connect with Michelle on Twitter and Instagram.