My very first credit card was a secured card with a $500 deposit and credit limit. I had no credit to my name — and no credit score.
I’ve worked hard to build my credit since then, and I’m happy to say that I’ve been firmly in the excellent range for many years now. This makes me feel good not just because it was a personal goal, but also because it has been an investment that’s paid off time and again.
In addition to the ephemeral things, like being more confident when applying for credit, having a high credit score and strong credit history has literally paid off for me in money saved. Here are a few examples.
1. A lower rate on my mortgage
I purchased a house last year, which means mortgage rates were around their decades-long peak. But while I saw folks talking about their 7%-plus rates, I was able to get a rate more than half a point lower than the average at the time.
This was entirely due to having a strong credit history and high score. (FYI, the speediness of my mortgage approval also had a lot to do with my excellent credit.)
Although half a percentage point may not seem like much, it can add up significantly over a 30-year mortgage. Consider this data on a $200,000, 30-year mortgage at different interest rates:
| Interest Rate | Total Paid | Total Interest Paid | Monthly Payment |
|---|---|---|---|
| 6.00% | $431,676 | $231,676 | $1,199 |
| 6.25% | $443,316 | $243,316 | $1,231 |
| 6.50% | $455,089 | $255,089 | $1,264 |
| 6.75% | $466,991 | $266,991 | $1,297 |
| 7.00% | $479,018 | $279,018 | $1,331 |
Data source: Author’s calculations
As you can see, a 6.5% rate would cost $67 less per month than the same mortgage with a 7% rate. That’s a difference of more than $24,000 over the life of the loan.
2. No down payment for new utilities
When I was young and without credit, every time I moved, I had to fork over a couple hundred bucks (at least) in down payments to set up new utilities. (For some reason, the power company wouldn’t just take my 19-year-old word that I was good for it.)
With my now well-established credit, those requirements are a thing of the past. I have a proven history of managing my debts responsibly, so the utility companies know I’m good for it.
3. Intro APR offers to pay off big purchases
Between moving across the country, buying a house, and having a few unexpected surprises along the way, I’ve been dealing with a bit of credit card debt. But you know what I haven’t been dealing with? Credit card interest.
Instead of paying 20% on a credit card balance, or even 12% on a personal loan, I’ve been able to open multiple credit cards with intro 0% APR offers. This has allowed me to pay off my debt a little at a time over the last 12 months, interest free.
My strong credit history directly impacted my ability to qualify for more than one new intro APR card in a short period of time — and with high enough credit limits that they were actually useful. Without these offers, I’d be out hundreds of dollars in interest fees.
4. All the best rewards credit cards and bonuses
Speaking of credit cards, I can’t downplay how much money I’ve saved through rewards and welcome bonuses over the years. And I owe a big part of that to my excellent credit.
Between cash back cards and travel rewards, I estimate I’ve earned $10,000-plus in welcome bonuses alone over the last decade or so. Then there are thousands of dollars more in purchase rewards, and still more value from dozens of card and travel benefits.
Without excellent credit, I would never have qualified for some of these rewards cards. I also would have missed out on some excellent adventures.
Building credit takes time, but it pays off
Going from zero to excellent in anything takes time, and that goes for building your credit score, too. The work you put into ensuring you have a healthy credit history can really pay off, however, making it an excellent investment.
