Why improving your credit score can be worth the effort

Usually, it’s borrowers with poor credit who seek to increase their credit scores. However, even people or businesses with a fair or even a good credit score could benefit by bringing it higher. The better a  consumer's credit score is, the more likely he or she is to realize the tangible financial benefits associated with an excellent rating.

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Why people with a lower credit score could benefit by improving it

Lenders use people’s credit scores to determine the terms associated with borrowing money. People with a fair credit score land somewhere between poor and good which could count against them if they try to apply for a credit card or loan. While people with fair scores have a better chance of getting a loan than someone with a bad or poor rating, the terms offered may be less than desirable.

· Charged higher interest rates

·  Receive lowered lines of credit

·  Credit not approved at all

By improving their credit scores, consumers can enjoy numerous benefits such as better interest rates, more negotiating power, higher credit limits, easier approval for apartments or rental homes, better car insurance rates and no security deposit on mobile plans or utilities.

Lenders give small businesses a tough time

Small businesses report they consistently have trouble attaining credit, despite a real need for funding. This is because traditional banks are generally unwilling to give loans to small businesses since the financial crisis of 2007-08. In 2015 small businesses represented just 20 percent of business loans (which was an increase bringing it back to the rate it was 10 years ago), but overall is still way down. For comparison, small business loans represented 34 percent back in 1995.

To qualify for an SBA or traditional loan, most people will need to have both an excellent business and personal credit score. By increasing even a good credit score, business owners have a much better chance of being qualified to borrow the amount of money they need. 

Wells Fargo causes 'collateral damage' to credit scores

Even people who have typically enjoyed excellent scores can suddenly find themselves in a difficult situation and be penalized for events beyond their control. For instance, not too long ago reports surfaced that Wells Fargo employees were caught opening up credit accounts in customer names without their authorization. 

The bank paid the fines and fees but the damage done to consumer credit scores? Not so easily rectified. A recent LA Times report referred to damaged credit scores as “collateral damage” of the unscrupulous behavior of those bank employees. How fair is this for the victims? Not to mention the ripple effects. These victimized consumers are going to have trouble when trying to open an account, apply for a mortgage or even rent an apartment. 

Faster approval and better loan terms

People applying for either personal or business loans also find higher credit scores opens the door to faster loan approvals with better terms. Even if a person or a business qualifies for a loan with a lower score, why should they accept higher interest rates, costing them even more money?

This is why it’s important for you to keep tabs on your credit scores and seek ways to improve it if it suddenly drops. Whether you want to open your own business, rectify the damage done to your score that was beyond your control, or simply apply for a credit card with great terms or valuable rewards, check out ways to improve your credit score.