As tempting as it is to swipe your credit card and treat yourself to a new wardrobe or shiny new car when you make the effort to be financially responsible, it pays off. Once you’ve built a solid credit standing, that’s when you will be able to reap several benefits, such as qualifying for credit cards with top rewards, enjoying lower insurance premiums, and borrowing funds with low-interest rates.
Here’s a look at the different loan opportunities available to you when you possess good credit.
Banks & Credit Unions
Banks & credit unions are a preferred loan source for many, especially those with a credit score of 670 and above. Why?
Because it’s virtually guaranteed that they’ll receive a stamp of approval on their loan application. The higher your score, the lower the interest rate you can expect to receive.
Home Equity Loans
According to different credit repair companies, home equity loans and home equity lines of credit (HELOCs) are excellent sources of funding for those holding a good score. You’ll typically be exposed to larger loan amounts and obtain better interest rates than some of the other loan sources, as they are secured by your home.
Just be mindful that these types of loans will tack certain provisions onto the contract that can impact payments.
For example, you may receive a fixed rate with payments based on a 20-year loan, but after the first 5 or 10 years, the entire balance of the loan may be due.
While these do not encompass direct lenders themselves, these platforms give you access to hundreds of different lenders to consider. Think of it like Hotels.com or Kayak. Loan aggregators can be advantageous because they save you the time and energy of having to shop around for potential lenders.
To get started:
You simply complete a single application, and the web aggregator will present you with options based on the specs and criteria you provided.
Personal Auto Loans
The beauty of having a good credit score means you can skip the nail-biting time where you’re waiting for approval, and feel confident that you will, in fact, receive your loan. The only time you’ll run into trouble is if your credit report demonstrates that you had specific issues with a current or prior auto loan. Similarly, if your current income is deemed insufficient to qualify for the loan you’re requesting, then you can run into trouble.
Apart from that, you’ll likely receive approval and be present with multiple options to choose from. Auto lending is quite different from mortgages.
The reason is due to the diversity of the industry - there are credit unions, banks, and subprime lenders each sporting their own set of criteria.
On average, mortgage lenders are looking for a minimum credit score of 620. Some lenders, however, will go as low as 580. There is a catch, though. You’ll be hit with much higher interest rates when you have a low credit standing.
When your credit is within the range of 670 or higher, which is considered to be strong, you’ll likely not only get approved, but you’ll receive lower mortgage rates as well. With good credit, you’re also less likely to need a co-signer and you may avoid having to make a lofty down payment.
When you possess a strong credit score, it opens up the doorway for the types of loans you can qualify for and what the parameters of that contract - such as the interest rate - will be. With a good credit score, there are a lot more opportunities waiting at your doorstep. Just do your research, and you’ll be good to go!