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Lesson #5.1 How Good Credit Gives The Best Choices (1:30 mins)

You’ve probably heard your parents or other adults talk about the importance of having good credit. But what does that actually mean? And why is it so important?

So what the heck is credit?

Good credit is simply a measure of your financial trustworthiness. It’s used by lenders to determine whether or not you’re a good candidate for a loan. The higher your credit score, the more likely you are to get approved for a loan with favorable terms (like a low interest rate).

It may seem like good credit is only important for adults who are looking to buy a house or a car, but the truth is that good credit is just as important for college students. Here’s why:

Good credit can help you get a job after graduation.

Believe it or not, employers often look at potential employees’ credit scores as part of the hiring process. If your credit score is low, it could be the difference between getting your dream job and being stuck in a dead-end job.

Good Credit Can Help You Get An Apartment

When you’re ready to move out of your college dorm and into your first apartment, one of the things your landlord is going to look at is your credit score. A good credit score shows them that you’re financially responsible and therefore more likely to pay your rent on time. If you have bad credit, they may be less likely to rent to you or may require a larger security deposit.

Good Credit Can Help You Get The Best Loan Interest Rates

Another benefit of having good credit is that you’ll likely be able to get a loan with a lower interest rate. This is because lenders see people with good credit as less of a risk and are therefore more willing to give them loans with better terms. This can save you a lot of money in the long run, especially if you’re taking out a loan for a large purchase like a car or a house.

For example, let’s say you have a choice between two different loans: one with a 5% interest rate and one with a 10% interest rate. Assuming both loans have the same terms, you would save $5,000 in interest charges over the life of a $10,000 loan by choosing the 5% interest rate loan instead of the 10% interest rate loan.

However, if you don’t have good credit, you might not be able to get a loan at all. Or, if you are able to get a loan, the interest rate might be so high that it’s not worth it.

Good Credit Can Help You Save Money

Good credit can also help you save money in other ways. For example, if you have good credit, you’re more likely to get approved for a rewards credit card. These cards offer cash back or points for every purchase you make. Over time, these rewards can add up to significant savings.

Your credit score can also affect how much you pay for car insurance. Many insurance companies use credit scores as one way to determine premiums, so if yours is low, you could be paying more than someone with good credit. This is just one more way that having good credit can save you money!

Good credit can also help you get insurance discounts. Many insurance companies offer discounts to customers with good credit scores because they view them as being less of a risk. So if you have good credit, you could end up paying less for your auto insurance or renters insurance down the road.

Bottom Line: Everything Is More Expensive When You Have Bad Credit

Good credit is essential for college students because it can help them get a job after graduation, rent an apartment after graduation, get approved for loans, and get lower interest rates on loans. Additionally, many insurance companies offer discounts to customers with good credit scores, so it’s well worth it to start building good credit now!