Having a good (or excellent) credit score makes you feel pretty good. Seeing the needle on your credit score dial swing into the green can give you a sense of freedom and achievement, and can set you on the road to financial wellbeing. But what are the other, tangible benefits of a high credit score? Loqbox has picked out the top 10.
Your credit scores (plural – you actually have three, not one) are numbers generated from your three credit reports by the main credit reference agencies (CRAs) in the UK: Experian, Equifax and TransUnion.
Lenders don’t see your credit scores (those numbers are just for you to see) but they give you a good idea of how a lender may view your application with them when they run a hard credit check on you. Find out more about how lenders use credit scores here.
If you don’t know yours, or haven’t checked all three, you can do that using these great services. It’s free, you can check as often as you’d like to, and using these services won’t hurt your credit score:
ClearScore (uses Equifax data)*
Credit Club (uses Experian data)
Credit Karma (uses TransUnion data)
*All of these services are equally recommended. But for transparency, if you sign up for ClearScore using this link we do receive a little commission.
What are the benefits of a high credit score
1. Getting accepted for credit
This is a simple one, but it’s an important one. Whenever you apply for credit like loans, mortgages and credit cards, lenders likely do a hard credit check on your credit report. This is where they take a deep dive into your credit history. You can read more about hard vs soft credit checks here.
Although the lenders don’t see your credit score — that’s just for you — they will see all the information in your credit report. Your score summarises how creditworthy you are likely to be seen as. So, one of the main perks of having good credit is that the higher your credit score, the better the chance you have of being accepted for any credit you apply for.
It’s often not until you really need credit that you realise how important it is to have a good credit score. But it’s worth knowing that it can take quite a bit of time and patience to sort out your credit reports. So it’s better to get on it now to save yourself pain further down the line. This is the number one reason to get your credit score sorted.
2. Lower interest rates
The second reason to have a great credit score is that it can help you get the best deals when you apply for credit. When you apply for a loan, credit card or mortgage, you’ll want to get the best possible interest rates. Getting good rates of interest can literally save you thousands in the long term.
The interest rates you’re offered often depend on how creditworthy lenders believe you to be. If you’ve got a good history of paying off your debts, they will be more likely to let you pay it back with more favourable interest rates.
3. Higher credit limits
The top three reasons are kind of linked, but they are the main reasons that most people want to get their credit score looking good. Once you’ve been accepted for the credit you’re applying for, and you’ve managed to get the best interest rates you can for repayment, you’ll be in a great position to borrow more money.
You may not need to borrow more, and it is important to only borrow what you can afford to pay back (otherwise you could see your credit score plummet if you miss payments), but sometimes it helps to be able to push the credit limit up.
Lenders look at your credit history to decide how much they are willing to let you borrow. This is all part of the same hard credit check they perform to see whether they will accept your application and the interest rates they offer. So the higher your credit score, the more likely you will be to get higher credit limits.
4. More mobile phone contract choices
It’s not just credit cards, loans and mortgages that require credit checks. Did you know that mobile phone contracts are also a form of credit? Phone service providers actually lend you the phone and you pay off the debt every month alongside your phone usage.
So, when you apply to take out a mobile phone contract, your credit score can impact the quality of your options. If you have a low credit score you may only be able to take a pay-as-you-go option, while higher scores will open up more choice and higher-end handsets.
5. Better rental options
Did you know that landlords sometimes do a soft credit check on you when you apply to become a tenant at their property? You can actually be refused a tenancy if your credit report shows you have had missed payments, defaults or County Court Judgments in the past, or be asked to provide a guarantor for your rental agreement. Guarantors aren’t always easy to get hold of as they will have to take responsibility for your debts.
However, if your credit report is looking positive, you’re much more likely to be given the green light to move into a wider choice of properties. So, if you’ve got your sights set on a particular place to live, you’ll want to give your credit score a lift to get the best possible chance.
6. Negotiate better deals
When you have a higher credit score, it means that lenders will see you as more creditworthy. That gives you a better hand to deal when you want to negotiate better deals or additional lines of credit.
Did you know it’s actually possible to negotiate lower interest rates with your creditors? It’s not always going to turn out the way you want but if you’re able to show them that you’ve managed your debts well in the past (in other words, by having a great credit score) you might be able to get lower interest rates on existing debts.
7. Give you more employment options
It’s not always the case, but if you apply for a job in a sector such as finance or law, it’s possible that you will be credit checked as part of the interview process. Generally, this is because you may be left in charge of large sums of money or have access to a lot of personal data, so your potential employer wants to make sure that you can be trusted with it. Other jobs may also require a credit check to verify that you are who you say you are.
It may seem unfair - after all, a low credit score doesn’t mean you’re planning to commit a crime! But it does let them know if you are more likely to be financially stable, and therefore less likely to be tempted by access to money, or if you’re in financial difficulty, bribed into sharing sensitive information.
Employers can’t do this without your permission by the way. And it is a soft, rather than a hard, credit check. Meaning you can concentrate on answering the interview questions like a boss.
8. Save money on car insurance
Yep, your car insurance premiums can be affected by your credit score. When you apply for insurance the providers might want to check your credit history as part of it. What they find will impact on approval rates and costs, and can even impact on your premiums even after you’ve been accepted.
And remember, it’s a hard credit check, so you’ll likely see a dip in your score after this type of check (keep hard checks at least six months apart as a rule of thumb).
9. Save money on other types of insurance
It’s not just your car. Your home and belongings insurance providers are also likely to take a peek at your credit report too.
They want to know whether you’ve got a good history of repaying debts before they make a decision on what premiums to offer you. So, having a good credit score will help you to get the best insurance deals across the board.
10. Get utilities without security deposits
Most of the big six energy companies perform credit checks when you sign up with them. They don’t scrutinise your credit history as much as when you apply for a loan or a mortgage, but it will impact on their decision. Having a good credit score will give you much better options when it comes to choosing your energy supplier and tariffs.
If you fail a utilities provider’s credit check for a particular tariff, the most likely scenario is that they’ll suggest a more affordable one. However, you may also have to take on a pay-as-you-go meter. The per unit cost of energy on these tariffs is usually higher.
Can I improve my credit score?
Yes, and it might be faster and easier than you think! OK, so you know what the benefits of having a good credit score are. But maybe you’ve checked yours using one of the services we recommended and it’s not as high as you hoped. So, what can you do about it?
It’s easy, just get started with Loqbox Spend. Boost your credit score with your simple £2.50 a week Loqbox membership. We report your regular responsible usage to Experian, Equifax and TransUnion, which helps to grow your credit score and lets you take advantage of these benefits in no time. It’s as easy as that.
Improvements to your credit score are not guaranteed.