In short, yes, if you have good credit and a good credit score, you will generally be able to access and will be offered more loan options that have better terms and conditions than if you have bad credit. The main reason for this is that a good credit score reassures the lender that you will be able to repay the loan without any issues, as you have likely proved in the past. Although there is no guarantee with good or bad credit that you will be offered a loan or finance of any kind when you need to borrow money, lenders do tend to prefer borrowers who can demonstrate good credit behavior over time.
This may be achieved through paying off your debts on time or early, being on the voters register and even just having a valid phone number.
What is a Credit Score?
Your credit score is a number that ranges from about 300 to 850, with a higher number being more desirable. This number is calculated from a range of different aspects of your financial life, such as information taken from your bank accounts and current or past credit borrowed. All of your credit history is then considered by reputable credit bureaus, for example in the U.S., the three significant ones are Equifax, Experian and TransUnion and a score is generated that perceives your creditworthiness.
What is a Good Credit Score?
A good credit score will often be in the range of 670 – 850, which will almost always ensure a good loan offer is available to you. We have created a chart for easy reading so that you know what a poor to excellent score is here.
What Are The Benefits of a Good Credit Score?
Ensuring that you have a good credit score will significantly improve your odds of being offered better terms and conditions on different types of loans including credit cards, payday loans online, cash advance loans and more. We have listed our top three reasons why good credit can benefit you when trying to get approved for a loan here:
Higher Negotiating Power – You will have better bargaining power with a high credit score, as you will be sought-after when searching for the right money lender for a loan. This will give you serious power and allow you to also negotiate your interest rates, as a good credit score, 670+, is highly desirable from a lender’s perspective.
Getting a Higher Loan Amount – Having a good credit score will sometimes also give you an increased chance of being offered higher loan amounts, compared to someone with a lower score. You have already put in the hard work and earnt your score by showing you are responsible with your finances, which is a huge bonus in the eyes of a money lender.
Fast Approval Process – As you are already a preferred borrower due to your high credit score, you will also be pleased to know that your loan applications will be much smoother and often approved quickly. Someone with a mediocre score might face challenges in the application process, as they have more to prove to show that they can be responsible for making repayments on time.
How Can I Improve my Credit Score?
There is no need to worry if your score isn’t as high as you would ideally like it to be, you can likely improve it by changing some of your financial habits, although it is important to know that this might be a timely process. Here are our top three ways to help you improve your credit score:
Start Constructing your Credit History – The first thing that many people don’t realize is that your credit history will be completely non-existent if you do not have any bills or lines of credit against your name. To do this, you can first register your address on the electoral roll and then start paying bills.
Make Regular and Timely Payments – To ensure that your credit score stays high, it is crucial to make payments on time and not miss any repayments. A missed repayment on a bill will impact your credit score significantly, as the concept is to show that you are responsible and can be trusted to repay any form of credit. Whether you miss a payment on a $500 loan or a larger mortgage payment, any missed payments will affect your credit score.
Don’t Misspend Your Line of Credit – One easy way to increase your credit score is to make sure you are not using all of the credit offered to you. For example, if you are offered a $5,000 credit card limit, try to only use $2,500 of that, meaning your credit utilization will sit at 50%. A lower credit utilization rate is often preferred by lenders, and it is recommended to only use 30% if you are working towards increasing your credit score.
