Eight Surprising Side Effects of Good Credit

Of course everybody knows the main benefits to having good credit history and a solid score: lower interest rates on loans, which can save anywhere from hundreds to thousands over the course of the life of a loan. And of course, we all want low interest rates when it comes to mortgages and car loans.

But there are a handful of other less-mentioned benefits that come with having a good credit score, some of which you might not even have come across yet. Here are the lesser known side effects to maintaining good credit and proving to the banks that you are a responsible borrower

1. Less Paperwork

Sounds like a funny side effect of having good credit, right? I’m talking about No-Doc loans (or Low-Doc loans) that are used between the bank and lender when dealing with a home loan. They are different from regular loans in that they don’t include employment information, payroll, and other lengthy personal finances documentation. Traditionally, No-Doc loans were used for people who are self-employed, or cannot provide proof of employment. But they are also used for people whose credit score is so high, that the lender has no need to see further proof that they are a responsible borrower; their solid history and score are enough testimony to their ability and trustworthiness to pay off the loan on time.

2. You Can Be Picky

If you are shopping around for loans, be it for mortgage, a car loan, boat loan, or student loan, you can afford to be picky because you qualify for good interest rates. While some people who have poor credit have no choice but to go with the only bank that will loan to them, and most likely falling subject to incredibly high interest rates, those with good credit can peruse the market and even barter with banks to get a killer interest rate. (A good tactic is to tell the bank you really want to go with the lowest interest rate you’ve been quoted and see if they will either match or beat it.) People with less-than-stellar credit don’t have this luxury.

3. Easy to Find Housing—and I Don’t Mean to Buy

Did you know that landlords and management companies require a credit check before they will rent to a tenant? If a potential tenant’s credit score doesn’t look so good, the landlord can take this to mean that they might not be reliable in paying the monthly rent on time and refuse to rent to them. Or, the landlord could make such requirements as needing two months of rent upfront instead of one, or asking for a bigger security deposit. Most landlords will usually require a guarantor on top of some extra money—that is, somebody with good credit to co-sign the lease, as a security measure. But folks with good credit don’t have to worry about any of that. In fact chances are if a landlord knows you have good credit, they might even fight to get you into the unit because you’ve already proven that you are trustworthy with paying loans and bills on time.

4. Save Yourself a Utility Deposit

You’ve heard of security deposits for things like renting a condo. Believe it or not, utility companies such as gas, electric, and cable will also require a security deposit if the consumer’s credit score is not to their liking. Companies will charge up to a couple hundred dollars upfront for folks with poor credit. And considering the fact that most people change utility companies when they move, that’s a big chunk of money to have to save for in the midst of an expensive process. People with good credit have it easy in this department, though. Turning on the electricity should require a phone call and not much else!

5. Credit Card Perks

Sure, you might be getting a lot of credit card offers in the mail, but the best offers are reserved for people with the best credit. These cards come with low interest rates, which is to be expected, but they also come with other perks such as no annual fees and great rewards, often in the form of cash-back or travel options. The reason people with good credit get these deals is because banks already trust them with money, since they’ve proven themselves to be financially responsible and reliable on making payments. The other perk is that the credit limit is often very high, which is great for continuing to build that person’s credit. Why? Because one big factor in determining credit scores is the gap between a consumer’s credit allowance, and what they’ve actually spent. So if somebody with great credit has a $20,000 limit and has only spent $2,000 of that, their credit will improve because of the $18,000 difference between their limit and their spending.

6. In the Running for a Good Job

Some employers actually run a credit check before they hire, to get a sense of how reliable a person they are interviewing. It doesn’t quite seem fair, since somebody may be incredibly trustworthy and a hard worker even if their credit score doesn’t reflect it, but unfortunately it’s how many businesses conduct the hiring process. Imagine interviewing for your dream job, the interview goes great, you get to meet the CEO and you hit it off great, you shake hands and are told they’ll call you…. And you do get the call, but it’s a bust because your credit score didn’t reflect all of your other positive attributes. With a good credit score, there is no need for worry; the number on the paper will mirror the wonderful candidate that you are, and you won’t be passed up because of some poor financial choices.

7. No Relationship Woes (at Least over Finances!)

It’s no secret that one of the top reasons that couples fight is because of money and finances. If you’ve got great credit, cross that one off the list of arguments to have with your sweetheart. You will be in good shape to buy a house, or make investments, or start your own business. You will not have debt collectors hounding you for money, or have massive amounts of debt hanging over both of your heads. So happy credit can also equal happy relationship (on the money end of things—everything else is up to you!)

8. Peace of Mind

It’s nice to be able to sleep at night knowing that you have a good reputation with finances. The comfort of knowing that you have a solid credit score is certainly something to be proud of – it takes hard work and sometimes years to build it up nice and strong, and the result should be appreciated and should definitely bring with it peace of mind. Having a low score is a source of financial stress for so many, as it truly limits people in the things they are able to do in life. A secure credit score opens up windows and is a guaranteed way of saving money by getting low interest rates, and that is certainly something to feel good about.

DK is a financial blogger who specializes in writing about personal finance and ways to improve one’s credit. Check out his other work at RoadFish.com

Leave a Reply