4 Little-Known Reasons You Need a High Credit Score

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Your credit score is a measure of how likely you are to repay money you borrow. When you have a high credit score, you're considered a low risk by lenders. You'll be more likely to get approved for the top credit cards with the most features, and you could qualify for the lowest interest rates on loans.

Those are both good reasons you need a high credit score, but you may have already known about them. Here are a few other benefits of a high credit score that aren't talked about as much.

1. It could help you get lower insurance rates

Your credit score could save you $1,000 or more every year on your auto insurance. In most states, insurance companies are legally allowed to use your credit score when setting your rates. Consumers with higher credit scores tend to make fewer claims, which is why they can get lower rates on home and auto insurance.

It's not a minor difference, either. In 2023, drivers paid an average of $3,017 for auto insurance, according to data gathered by The Motley Fool Ascent. Drivers with poor credit paid an average of $4,145. Drivers with excellent credit paid an average of just $1,947.

If you have a car, you need auto insurance. Homeowners or renters insurance is also recommended. All those policies could be cheaper if you have a high credit score.

2. You won't need to pay a deposit for utilities or cellphone service

Utility companies normally require a credit check when setting up service. The same is true with wireless carriers, unless you get a prepaid plan.

They do this because if they approve you, they're going to provide a service upfront, and then bill you for it later. If you have good credit, they'll see that you have a track record of paying back what you borrow. If you have a low credit score or no credit history, that's a red flag.

In that case, they could require you to pay a security deposit. This protects the utility company or wireless carrier if you don't pay your bill. While you can get your deposit back after enough on-time payments, it's an upfront expense you'll avoid with good credit.

3. A prospective employer may want to run a credit check on you

Some companies run a credit check on potential job candidates. This is especially common if the position involves any sort of financial management, or if the job includes access to sensitive customer information.

To clarify, companies don't see your credit score during this type of credit check. They see a version of your credit report with your accounts, payment history, debts, and delinquencies. These are all factors that help determine your credit score.

Companies use credit checks to look for any red flags in an applicant. If you have several late payments, it could make employers question your organizational abilities. They'd probably also think twice about hiring you for a job that involved paying vendors on time. If you have a large amount of credit card debt, an employer could consider you a higher fraud or theft risk than someone who's debt-free.

4. It's easier to rent a home

Home buyers know that getting a mortgage is easier with a high credit score. But your credit score is also important when you want to rent a home.

Many landlords and property management companies run a credit check on applicants. They typically have minimum credit score requirements you must meet to even be considered. Also, if you have average credit and another applicant has excellent credit, you could miss out on the place you want.

When you're approved for a rental, your credit can also impact how much your security deposit costs. The advertised security deposit is often "based on approved credit." It's the amount you pay with a high enough credit score. If you have a lower credit score, you'll probably need to pay a larger security deposit.

There are all kinds of ways that your credit score affects your life. The easiest way to build and maintain a high credit score is to have at least one credit card that you use regularly. Pay the bill on time every month. This improves your payment history, which is the most important factor in your credit score.

It also helps to pay your credit card bill in full. You'll stay out of debt this way, which is good for your credit and means you won't need to pay any interest charges.

Once you've built credit, look at rewards cards, such as cash back credit cards . You can build and maintain your credit score with any type of card, but rewards cards allow you to save money by earning points or cash back on your purchases, too.

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