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Having good credit offers many financial advantages. You may find it easier to secure affordable housing, reliable transportation and even establish new utility services in your name. Bad credit, on the other hand, can make providing basic necessities for yourself and your family a lot more difficult and expensive. 

With the many benefits tied to having a good credit score, knowing the steps you need to bring those numbers up can help your credit score reach a brag-worthy status. 

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¹$1,000,000 Identity Theft Insurance for Eligible Losses: Identity Theft Insurance underwritten by insurance company subsidiaries or affiliates of American International Group‚ Inc.. The description herein is a summary and intended for informational purposes only and does not include all terms, conditions and exclusions of the policies described. Please refer to the actual policies for terms, conditions, and exclusions of coverage. Coverage may not be available in all jurisdictions.

No one can prevent all identity theft or monitor all transactions effectively.

What is a credit score and what does it mean?

A credit score is a three-digit number — typically between 300 and 850 — that lenders and other service providers refer to when determining how likely a consumer is to pay their bills on time.  

A credit scoring model calculates your credit score by examining the information in your credit reports. If your credit report shows a history of previous late payments, for example, your credit score will reflect that because there’s a greater likelihood you’ll pay late again in the future. But if your credit history is clean of derogatory information, you’re likely to have a higher credit score that indicates you are a lower credit risk. 

Why good credit matters

One of the primary reasons why having good credit should matter to you is because the condition of your credit will matter to future lenders, credit card companies, landlords, utility providers, insurance companies and even some employers. (Note: Employers may only review credit history with your written permission, and never your credit scores.)

Good credit often makes it easier to qualify for financing, leases, lower insurance premiums, and perhaps certain types of jobs or security clearances. Bad credit, by comparison, could lead to higher interest rates or perhaps lost opportunities altogether. 

Benefits of having good credit

In general, a good FICO Score ranges from 670-739 and a very good FICO Score ranges from 740-799. Once you earn a FICO Score of 800-850, your credit score is considered exceptional.

Earning a good credit score can unlock many opportunities. Here are five of the top benefits you may be able to enjoy once you earn good credit: 

1. Better qualification odds

Whether you’re applying for a new credit card, personal loan or another type of financing, having good credit could work to your advantage. Of course, your credit history and credit score aren’t the only factors lenders evaluate. Other details may also impact your eligibility for financing, such as debt-to-income ratio, employment history, income, and more. In general, good credit should improve your chances of approval when you apply for financing. 

2. Lower interest rates 

Lenders, credit card companies and others rely on your credit score and credit reports when setting the interest rates of loans, credit cards and more. In most cases, lenders reserve their lowest interest rates for applicants with the highest credit scores. Getting a lower interest rate on a loan has the potential to save you hundreds and perhaps even thousands of dollars depending on the situation. As such, working to improve your credit score could be well worth the effort. 

3. Higher credit limits and larger loan amounts

Another possible benefit of having a good credit score is the fact that you might be eligible for higher credit limits and larger loan amounts when you borrow money. Lenders and credit card issuers base your borrowing capacity in large part on your debt-to-income ratio (aka the income you earn and how it relates to your existing debts). But your credit score can also play a role in your borrowing capacity. As a result, a good credit score has the potential to help you qualify to borrow more money than you might be able to otherwise. 

4. Lower insurance premiums

In most states (with the exception of California, Hawaii and Massachusetts), auto insurance providers may review credit-based insurance scores when setting auto insurance premiums. A higher credit score tells insurance providers there’s a lower likelihood that you’ll file an insurance claim that could cost the company money. Therefore, having good credit could help you save money on car insurance

5. Smaller security deposits 

When you lease an apartment, open a new utility account or establish a new mobile phone service, the landlord or service provider will sometimes ask for a deposit for added security. However, if you have good credit, you may be able to get by with a smaller security deposit requirement and perhaps no upfront costs at all.  

How to achieve good credit

Improving your credit can take time, and the journey might look different depending on where you’re starting. Here are some basic credit tips that could be beneficial to people in a variety of situations.

  • Review your credit reports. It’s important to review your three credit reports before you start the credit-building process. You can claim free reports from Equifax, TransUnion and Experian at AnnualCreditReport.com once a week through the end of 2024 (and once every 12 months thereafter). 
  • Dispute credit errors. If you discover legitimate mistakes on your credit reports, such as accounts that don’t belong to you, the Fair Credit Reporting Act (FCRA) allows you to dispute them with the credit reporting agencies. This free guide from the Consumer Financial Protection Bureau provides instructions and templates you can use to navigate the credit dispute process. 
  • Consider opening new credit accounts. When you open new credit accounts and manage them in a responsible way (e.g., on-time payments, low balance-to-limit ratios on credit cards), those tradelines have the potential to help you build a positive credit history. Credit builder loans, credit cards designed for people who are new to credit, and secured credit cards could be worth considering if you’re trying to rebuild your credit score or if you’re new to credit. 
  • Authorized user strategy. Asking a family member to add you to an existing credit card as an authorized user might be helpful in your credit-building journey as well, as that account and payment history will appear on your credit reports. If you attempt this strategy, remember that it’s important to become an authorized user on a credit card account with no late payments and a low credit utilization rate. Otherwise, the credit card might hurt your credit score rather than help it when (and if) it shows up on your credit report. 

It’s also important to become familiar with the five factors that affect your FICO Score.

  • Payment history counts the most as it comprises 35% of your score, which is why on-time payments are so critical. 
  • How much you owe in relation to your credit limits accounts for 30% of your score. That’s why keeping balances low on revolving credit accounts (such as credit cards) is important.
  • Length of credit history accounts for 15% of your score, so the sooner you begin your credit journey, the better. 
  • New credit, which shows how often you’re applying for new credit (less is better), accounts for 10% of your score. Opening too many new credit accounts in a short period of time may signal that you’re in financial trouble. 
  • Credit mix, which shows if you’ve been successful in handling different types of credit, such as loans and credit cards, also accounts for 10% of your score.

Frequently asked questions (FAQs)

The top five benefits of having good credit are as follows:

  • Improve your odds of qualifying for financing.
  • Help you secure lower interest rates from lenders. 
  • Help you qualify for higher credit limits and larger loan amounts. 
  • Increase your ability to qualify for lower auto insurance premiums. 
  • Make you eligible for lower security deposits (and sometimes no security deposits at all). 

Earning good credit doesn’t always guarantee you’ll qualify for a loan or get a higher credit limit on your next credit card, however. There’s also no promise you’ll be eligible for a lower auto insurance premium or a lower security deposit either. Yet having exhibited responsible borrowing and repayment behavior in the past shows potential lenders you could be a low-risk customer and often influences the situations above.

Credit can be a useful tool when managed responsibly. As far as advantages are concerned, when you work to build good credit you may be able to enjoy many of the benefits above. 

Good credit doesn’t really come with disadvantages. However, there can be disadvantages to taking on more debt than you can handle, such as financial stress, relationship problems, health problems, credit problems and more. 

Keep in mind that debt itself doesn’t have to be a bad thing. But it’s important to exercise restraint and avoid borrowing more than you can afford to repay. It’s also wise to avoid high-cost debt (such as revolving outstanding balances on high-interest credit cards) whenever possible. 

If you’re struggling with overspending or too much debt, you can make a plan to pay your debt down little by little. The debt snowball method could help you get started. 

And if you feel that getting out of debt is more than you can handle on your own, consider working with a reputable nonprofit credit counseling agency. Such an agency can help you evaluate your options and may be able to enroll you in a debt management plan.

There are many ways to check your credit score online. Below are several options to consider. 

  • Your credit card company or bank might offer you a free credit score each month.
  • myFICO.com allows consumers to purchase copies of their three FICO Scores and credit reports for a fee.
  • Experian offers consumers free monthly access to their Experian credit report and FICO Score. Additional fees apply to review your credit reports and scores from the other credit bureaus. 
  • Equifax offers free access each month to your VantageScore 3.0 credit score through the Equifax Core Credit™ program. 

There are several consumer-facing websites that offer free credit scores as well. In exchange for accessing your credit scores from these websites, you may need to agree to receive marketing materials for financial services. The credit scores you view on these websites may differ from the credit scores lenders review when you apply for financing, but they can still be useful for educational purposes. 

It’s good to know that your credit scores fluctuate all the time and may differ from each source you’re checking them from, so don’t sweat small increases or drops. As long as they are trending upward you shouldn’t worry. It’s when you see a big drop in your scores that you need to check your credit reports to see what could be causing your scores to sink.

Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.

Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.

Michelle Lambright Black, founder of CreditWriter.com, is a leading credit expert with more than two decades of experience in the credit industry. She’s an expert on credit reporting, credit scoring, identity theft, budgeting, and debt elimination. Michelle is also a certified credit expert witness, personal finance writer, and travel writer who's been published thousands of times by outlets such as Experian, FICO, Forbes Advisor, and Reader’s Digest, among others. When she isn't writing or speaking about credit and money, Michelle loves to travel with her husband and three children — preferably to somewhere warm and sunny. You can connect with Michelle on Twitter (@MichelleLBlack) and Instagram (@CreditWriter).

Glen Luke Flanagan is a deputy editor on the USA TODAY Blueprint credit cards team. Prior to joining Blueprint, he served as a deputy editor on the credit cards team at Forbes Advisor, and covered credit cards, credit scoring and related topics as a senior writer at LendingTree. He’s passionate about helping people understand personal finance so they can make the best decisions possible for their wallet. Glen holds a master's degree in technical and professional communication from East Carolina University and a bachelor's degree in journalism from Radford University.