Society is increasingly becoming dependent on credit while making purchases and other financial decisions. Currently, good credit does not only facilitate acquisition of credit card and loans but has other crucial roles to play. Businesses are increasing specifying that one must possess a good credit before they extend any products or services to individuals. Therefore, a good credit comes with many benefits. This paper discusses such benefits.
In the modern financial world, it is more rewarding to have a good credit. A good credit refers to the ability of an individual to make his/her payments on time and in full. It is characterized by payment of at least the minimum required amount, on time payment, never missing any payment, and staying within credit limits. There are many benefits associated with good credit as discussed below.
Firstly, one enjoys increased credit card limits. Having a good credit increases the credit card limits meaning that the capacity of an individual to borrow rises significantly. This is because an individual proves to creditors that he is a responsible holder of credit card and can handle more credit responsibly. This occurs automatically or on request raising oneís credit score. Secondly, mortgage and refinancing rates become more attractive. With good credit, creditors tend to extend attractive rate for home loans because your credit history is clean. They recognize such an individual as an ideal customer in mortgage and refinancing, thus setting attractive interest rates to such customers (GoodCreditCo.com, 2012). Thirdly, the negotiating power of an individual increases in relation to good credit. A person with good credit regularly negotiates a reduced interest rate on his new loan or credit card by just referencing his good credit score. With low credit score or bad credit, creditors typically fail to budge on loan terms. Fourth, one stands a better chance for new loan and credit card approval. Individuals with bad credits avoid new applications of credit card and loan since they fear being turned down. However, with good credit, one applies for a new credit card and loan confidently and gives a good chance of approval although other factors like debt and income are considered. Other benefits as indicated by Irby (2012) include avoidance of security deposits on utilities, less documentation and hassle, increased ability of shopping around, and excellent as well as easy credit card deals.