Building good credit is one of the best steps you can take to strengthen your finances in the years to come. Whether you want to take out a loan for a car, get approved for a mortgage or need to borrow money to get your business off the ground, having good credit could help in a variety of ways. 

Your credit score helps lenders determine how reliable you have been as a borrower — the higher the score, the more likely you are to get approved for the credit you need. Strengthening your credit score is the result of many good habits, including: 

• Paying your bills on time
• Not using too much of your available credit (below 30% is recommended)
• Having a good mix of credit accounts
• Having a variety of old and new accounts

Keep reading to explore the benefits of building good credit.

Get approved for loans more easily

You’re more likely to be approved for a loan or a new line of credit if you have good credit. This is because a higher credit score signals to a lender or creditor that you could be a less risky borrower. 

For example, if you need funds to cover an unexpected bill, medical emergency or home repair, good credit may make it easier to get a personal loan. Typically offered by banks, credit unions and online lenders, a personal loan could be an option to borrow what you need without resorting to the higher interest rates of credit cards. Research different lenders, their terms and requirements to find the best personal loan for your situation before you sign. 

Secure better terms and lower interest rates

Good credit could help you get approved for better terms and lower interest rates on credit cards, loans and mortgages. Lower rates and better terms could give you access to a higher borrowing amount and save you money on interest over the life of a loan.

For example, you might get a higher credit limit on a credit card than someone with a lower credit score, or a larger mortgage amount with a lower interest rate. 

Have more choices when renting or buying a home

Renting or buying a home often includes a credit check. In the case of a rental, the landlord wants to ensure that you will be a reliable tenant with a history of paying your bills on time and in full. 

Similarly, in the case of buying a home, the lender will want to confirm that you will be able to afford the home. If you’re looking to secure a mortgage, the lender will also examine your credit report to determine how much money you can borrow, as well as what your interest rates and terms will be. 

Note that applying for a mortgage or any type of credit triggers a hard credit check by the prospective lender, which can cause a small, temporary dip in your credit score. You can reduce the effect on your credit score if you seek pre-approved offers first. 

Find more employment opportunities 

It’s possible that a poor credit score may be a factor that limits your employment opportunities and jobs in the future. Some employers run a credit check as part of a background check before they offer a job to a candidate (with a candidate’s permission), although some states have recently restricted this practice. 

Potential employers won’t see your credit score or income. Instead, they review a version of your credit report that includes your payment history, types of accounts and any bankruptcies. Employers do this to determine how responsible or financially vulnerable a potential employee might be, particularly if they will have access to sensitive information or large amounts of money.

Your future is brighter with good credit

Building good credit now is a gift to your future self. While it’s not always easy to keep your credit card balances low, pay your bills on time and maintain a good mix of credit accounts, there are certainly benefits. Being able to secure a loan quickly and with good terms and having more choices when it comes to finding a home or job are all perks to work toward.

Notice: Information provided in his article is for information purposes only and does not necessarily reflect the views of cfohub.com or its employees. Please be sure to consult your financial advisor about your financial circumstances and options. This site may receive compensation from advertisers for links to third-party websites.