What is a credit score? It’s essentially a scorecard of how trustworthy you might be financially. Having access to credit can be an important part of your financial life, and building good credit now is an investment in your not-so-distant future. Having good credit may help you secure financing for large purchases, net lower interest rates and have greater borrowing power. What exactly does that mean?
Establishing good credit typically allows you to do things like:
- Secure a student loan. If you need a student loan to help pay for college, lenders may look more favorably upon you if you have established a good credit history. Having good credit may potentially result in lower interest rates, which may in turn save you money in the long run.
- Buy a car. Unless you can buy a car with cash, you’ll likely get an auto loan. Having a poor credit score could result in higher interest rates and needing a larger chunk of money for your down payment.
- Get car insurance. You’ll need to have auto insurance for that new car you just bought, and guess what: Insurance companies look at your credit, too. The better your credit, the more likely you are to get a better premium, which can help keep more money in your pocket.
- Rent an apartment. Thinking about off-campus housing when you’re in college? Many landlords check prospective renters’ credit. Why? Because good credit shows that you’re more likely to pay the rent on time.
- Establish utility services. Once you have that apartment, you’ll set up utilities such as electric, water and cable. Some utility companies will check your credit prior to beginning service. Again, this tells them you’ll be a good customer who pays for the services on time.