What counts as an excellent credit score can differ from one lender to the next. Generally, if your credit score is above 750, you’re considered to have excellent credit. If you already have an excellent credit score, make sure you’re getting the most out of it.
Better Chances for Approval
Many businesses use credit scores to determine whether to approve your application. When you have a poor credit score, there’s a greater chance your applications will be denied because creditors may consider you to be a risky borrower. You have a much better chance of being approved with an excellent credit score, since your credit history shows that you’ve borrowed responsibly in the past. Outside those circumstances, you’ll find that it’s much easier to apply for credit cards and loans when you have an excellent credit score. However, you can quickly ruin an excellent credit score by making too many credit applications, especially in a short period of time.
Save Money on Interest
Interest rates on credit cards and loans are directly related to the credit risk you pose, which is measured by your credit score. Excellent credit allows you to qualify for the lowest interest rates, which can save you thousands of dollars over your lifetime. For example, if you apply for a $250,000, 30-year fixed mortgage and qualify for a low rate of 2.842%, you’d pay a total of $121,818 in interest over the life of the mortgage. On the other hand, if you apply with a credit score of 640 and qualify for an APR of 3.455%, you’d pay an additional $51,911 in interest over the life of the loan.
Lower Monthly Loan Payments
Since loan payments are directly tied to the interest rate, having an excellent credit score can make it easier to afford your mortgage or car loan payments. Consider getting a $25,000, 60-month auto loan. With an excellent credit score above 720, you could qualify for a monthly payment of $462. A credit score of 640, on the other hand, would give you monthly payments of $538. That amount can make a big difference in your monthly budget.
Qualify for Higher Credit Limits and Loan Amounts
The amount of credit a credit card issuer is willing to extend to you is based partly on your credit score. With an excellent credit score, you’ve likely demonstrated that you can handle credit responsibly. When you apply for most major credit cards, you’re more likely to get a higher credit limit—provided your income is enough to handle that credit limit. Similarly, when you’re applying for a loan, having excellent credit will allow you to qualify for higher loan amounts. This makes a major difference in the price of the home or car you can afford to buy.
More Credit Card Options
Some of the best credit cards pay generous signup bonuses and rewards, but they’re only available to consumers who have the best credit scores. With an excellent credit score, you have a much better chance of getting approved for some of the best credit cards on the market. On the other hand, having a low credit score limits your credit card options tremendously. Being able to qualify for better credit cards can allow you to earn rewards, such as cash back, gift cards, merchandise, and travel. Having more credit options available to you also means you can avoid predatory lending like payday loans, title loans, and pawnshop loans. These types of short-term lending options have the highest interest rates and often keep borrowers trapped in an impossible cycle of debt.
Shop Around for the Best Terms
More companies are willing to approve you when you have excellent credit. That means you have the freedom to shop around with different creditors and lenders, and you can ultimately choose the credit card or loan with the best terms. On the other hand, if you struggle with your credit, your limited options may force you to choose credit products that don’t have the best interest rates. You don’t always have to go far to shop around. If you haven’t opted out of prescreened credit offers, you may automatically receive credit card or loan options from creditors and lenders. Or, you can read a few credit card reviews to narrow down your selection.
