A credit score above 750 is considered excellent credit. Approximately 18.3 percent of Americans have a FICO score between 800 and 850, with only 0.5 percent hitting the 850 mark. Excellent credit is not impossible to achieve, you just have to be consistent in your efforts to pay down your debt on time.
If you’ve established a solid foundation for your credit, it means you have achieved excellent credit status. Here are some ways you can take advantage of your superior credit score to help you as you move forward in life.
Whether you are applying for an auto loan, personal loan or any other line of credit, use your excellent credit to your advantage. Bargain with potential lenders to lower the interest rate on the life of your loan. Lenders want to do business with you because they know you’ll pay them back, so explore your options before you commit to a loan.
Rates make all the difference. Take a look at the following example to get an idea of what the difference a few percentage points can make throughout the life of a loan.
The difference you pay throughout the life of an auto or personal loan is drastic based on the rate you are given. For instance, if Joe Money had a credit score below 630 he would most likely have to settle with a nine percent APR for an auto loan. Based upon a this scenario, he would make monthly payments of $519 if he took out a $25,000 auto loan.
However, if Joe had a credit score above 750, he would most likely receive a finance rate of two percent APR. For a $25,000 auto loan with two percent APR, Joe’s monthly payments would only be $438, a difference of $80 a month. If Joe has excellent credit he can save almost $100 a month on his car payments, just for having stellar credit. (This example is based off a simulation from CarMax, rates and calculations may vary based on individual circumstances)
Refinance to save money
If you originally purchased your home with a much lower credit score, it may be time to refinance your current mortgage to get a better interest rate. Take advantage of your excellent credit by reducing how much money you pay to your mortgage lender.
If Joe Money had average credit and had a home loan balance of $300,000 with 6.5 interest, he would pay approximately $488,000 or $1,400 a month for his mortgage. Yet if his credit was excellent and he was able to refinance his home loan to get a four percent interest, Joe would pay roughly $397,000 for his home loan, or around $1,100 a month. Joe would save almost $92,000 for utilizing his good credit at the right time. (This example is based off a simulation, rates and calculations may vary based on individual circumstances)
Utilize your credit to save
Whether you have a credit score of 750, 800 or are one of the few people who has a near-perfect credit score of 850, it’s important to understand the power your score grants you. Paying your bills on time and reducing your debt to a minimum has proven valuable. Allow your excellent credit score to save you money by reducing the interest rates on all of your loans.
Call your credit card companies and try to negotiate a lower interest rate on your cards. Also, consider renegotiating any loans under your name to reduce the amount of interest you pay on the life of the loan. An excellent credit score gives you a great deal of power — use it wisely to cut corners and save money.Related