It’s no secret that having a good credit score has a massive impact on your financial well-being, which is probably why we’ve seen credit scores steadily rise over the last 20 years or so. Since 2010, credit scores are up, with the average FICO score rising from 687 to 718 in 2024.
But not everyone has been able to get their score up to this threshold. Around one in five (19%) of Americans say that they have a fair credit score (580-669), according to Finder’s Consumer Confidence Index.
Finder spoke with Bruce McClary, a spokesperson for the National Foundation for Credit Counseling (NFCC), and Jeff Richardson, senior vice president of marketing and communications and VantageScore to find out some advantages of having a high credit score.
If you’ve ever applied for a credit card or a loan, you know how important having a good credit score can be in your odds of getting approved. “One of the top benefits of having a higher credit score is that it improves your chances for qualifying for access to loans or lines of credit,” says Bruce McClary.
In addition to being able to have access to better loan options, having a higher score means more agreeable terms when you get approved for a credit card or loan and having a good credit score improves the “likelihood that you’ll be able to receive more affordable interest rates and lower fees,” says McClary.
Along with better rates and higher chances of approvals, having a higher credit score also means you’ll have access to larger lines of credit and loan amounts, which can help your overall credit utilization ratio.
Getting a good credit score also broadens the type of products you have access to and offers an on-ramp to consumer credit that can help consumers “access mainstream credit who would otherwise be left to approach predatory lenders for loans,” says Richardson.
One of the additional benefits highlighted by McClary for upping your credit score is having access to the suite of premium credit cards on the market. A good credit score means you have access to “more attractive and more generous reward programs that might not be available to people with lower tier credit scores.”
While there are no official numbers on what score you’ll need to get approval for renting a home or an apartment, a 2021 RentCafe study found that the average credit score of renters in the U.S. was 638.
Improving your credit score could also help you save on your home and auto insurance as you’ll be improving your “insurance score.” According to the Insurance Information Institute, these “credit-based insurance scores are ratings based fully or partially on a consumer’s credit information.” These numbers are used in conjunction with other factors to help underwrite and price policies.
About “95% of auto insurers and 85% of home insurers in 47 states use a credit-based insurance score when calculating risk,” according to InCharge Debt Solutions. States where it is illegal to use your credit history as a factor for insurance premiums include:
Getting gas, electricity or water hook-up has a lot to do with your credit history, according to the Federal Trade Commission (FTC). If you have a good credit history, your chances of needing to make a deposit to access these utilities decreases. Once you have these services up and running, your on-time payments are an important factor, as delinquent payments may get reported.
In recent years, having a good credit score has become more important when applying for a cell phone contract. According to TransUnion, “reduced payments from smartphone makers, and the expectation consumers will not be able to (or want to) pay the full cost of an expensive phone up-front” mean that retailers are doing more credit checks on potential customers to make sure they’ll be able to make good on their contracts.
Improving your credit score will depend on where you’re coming from, that is, whether you’re building credit for the first time or trying to rebuild your credit.
The most important factor in your FICO or VantageScore is your payment history, so you’ll need to continue making on-time payments and establish a long history of credit to get a good credit score.
For McClary, there are three main areas where consumers need to focus to make sure they’re on track to getting good credit, “paying your accounts, keeping your balance manageable and not opening too many accounts at one time. If you do this, you should maintain a pretty decent credit score.”
For those trying to rebuild their credit, Richardson says that “it’s harder to build back up after a reported delinquency or default.” But there are steps you should be taking on the road to recovery.
“A great way to improve your score is to pay down those balances. But be judicious and disciplined. It’ll take some time for these scoring models to see that this is a regular behavior. Lower balances over time means your score will improve. That’s called your utilization rate. Keeping that below 30% is a really important way to build credit and demonstrate the ability to manage credit wisely.”
Having good credit is not something that you can set and forget. It’s something that takes time and patience. Monitoring your credit report, either through the AnnualCreditReport.com or one of the credit bureaus is a great way to ensure that you maintain or are building good credit, so that you can reap all the benefits of having a good one.
The Chime Credit Builder Card can help you build credit without charging interest and doesn’t require a deposit or monthly fee.
Top apps like Self that build credit include Kikoff, Grow Credit, Chime Secured Credit Builder Card, Credit Strong and Cleo.
Top alternatives to Kikoff for easy credit-building include Self, Cleo, Grow Credit, Fizz and One Finance.
The Tomo credit building card is currently on a waitlist, meaning it’s not available right now. Compare features and other options here.
Kovo Credit Builder helps you build your credit history for around $10 per month and reports to four credit bureaus. Many competitors do not.
The best credit-building apps include Self Credit Builder, Step, Fizz, Cred.ai, Cleo, Grow Credit and Credit Karma Credit Builder.
Lexington Law is a credit repair company, but it carries a poor reputation.
Kikoff offers several credit-building products, including a secured card with no monthly fee, no interest charges and a low minimum deposit.
Prepaid credit cards are secured cards that work like debit cards to avoid APR and build credit. Top options include Step, Current, Varo and more.
Cushion is an all-in-one banking app that helps you track your spending and build credit without interest charges. See if it could be right for you.