How a better credit score can make you more financially healthy

We take a look at six ways a good credit score can make you more financially healthy – and happy.

Using a credit card

Having a good credit score is important if you want to apply for credit such as a personal loan, credit card or mortgage. The better your score, the more likely you are to be accepted.

But there are a number of other reasons a good credit score can help you. Below, we look at six benefits of having a good credit score.

1.       Access to more competitive rates

A high credit score indicates to lenders you are a responsible borrower and you make your repayments on time. Not only does this mean they are more likely to lend to you, you are also more likely to be accepted for cheaper interest rates on personal loans, credit cards or mortgages.

This will bring down the overall cost of borrowing, helping you to pay off the amount you owe more quickly.  

By using our Eligibility Checker when you apply for loans or credit cards, you’ll be able to see the deals you’re more likely to be accepted for, and it won’t affect your credit score.

2.       Access to longer promotional rates

If you’re looking for a 0% balance transfer credit card to help clear existing card balances, or if you’re looking to spread the cost of an upcoming purchase with a 0% purchase credit card, a decent credit score will stand you in good stead.

That’s because the longest 0% deals are only offered to those borrowers who have a high credit score.

Currently, the top cards offer interest-free balance transfers for as long as 29 months. That’s more than two years without paying interest. Be aware though that you will need to pay a transfer fee and it’s best to clear your balance before the interest-free deal ends.

Representative example: If you spend £1,200 at a purchase interest rate of 19.95% p.a. (variable) your representative rate will be 19.9% APR (variable).

On purchases, you can spread the cost for as long as 26 months interest-free with the very best deals, but again, remember to clear your balance before the 0% deal ends.

Representative example: If you spend £1,200 at a purchase interest rate of 20.95% p.a. (variable) your representative rate will be 20.9% APR (variable).

3.       Access to better rewards and deals

Some credit cards also come with rewards such as cashback, reward points to spend in certain retailers, or air miles that can be exchanged for money off flights. Again, the higher your credit score, the more likely you are to be accepted for these offers.

Rewards such as these can be a great way of getting something back for your spending, but be aware these cards often come with high interest rates, so only apply for one if you know you can clear your balance every month.

4.       You may be able to borrow more

Those with a good credit score are likely to be able to borrow more. This can help you achieve your goals more quickly - such as paying for home improvements or a new car.

If your credit score is poor, lenders may worry you won’t be able to pay back what you borrow and are therefore likely to offer you a lower amount. It’s important you only borrow what you can afford.

5.       You may pay less for monthly insurance instalments

It’s generally more expensive to pay for insurance in monthly instalments, rather than in one annual lump sum, as interest is often added.

If you have a poor credit score, however, and you pay for car insurance monthly, costs may be even higher. You may even find some insurers won’t let you pay monthly.

When you compare insurance quotes a “soft search” will be carried out - this won’t affect your credit score.

If you decide to pay monthly, however, you’ll be taking out a credit agreement (as you’re covered for a year, but haven’t paid upfront) and a “hard search” will be carried out. This will show up on your credit report.

6.       You’re more likely to get accepted for a phone contract

Your credit score will also be checked if you are applying for a pay-monthly mobile phone contract.

Because this is a credit agreement, providers will want to know if you can afford your monthly payments and how well you’ve borrowed in the past. The better your score, the more likely you are to be accepted for the top deals.

How to improve your credit score

If your credit score isn’t up to scratch, don’t panic. There are plenty of steps you can take to help improve it.

Signing up to Credit Monitor is a good place to start. You’ll be able to access your credit score for free and it won’t leave a mark on your credit report.

Plus, we’ll send you personalised tips and insights to help you improve your score and we’ll alert you about any activity on your file that could be suspicious.

Simple steps such as making sure you’re on the electoral register , paying your bills on time and using a credit builder card  if you have no credit history and only borrowing what you can afford, can also help improve your score - and get you on the road to being financially healthy and happy.

MoneySuperMarket is a credit broker, not a lender - this means we'll show you products offered by lenders. We never take a fee from customers for this broking service. Instead, we are usually paid a commission by the lenders - though the size of that payment doesn't affect how we show products to customers.

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