Building and maintaining a good credit score can pay off in multiple ways
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Fact checked by Brendan HarknessFact checked by Brendan Harkness
Having a good credit score can make life a lot easier. Not only does it make getting approved for a loan or credit card easier, but it can help you qualify for the best interest rates. You may also run into fewer hurdles when renting an apartment or applying for a new job.
Good credit has all these benefits because it suggests to lenders and other interested parties that you pay your bills on time. Your credit score represents how you’ve handled credit in the past, and a good score indicates that you manage your money well.
Here’s a closer look at what constitutes a good credit score, along with the various benefits of having one.
Key Takeaways
A good credit score can open the door to faster loan approval, better interest rates, and higher credit limits.Poor credit, on the other hand, can limit your options for loans, credit cards, apartment rentals, and even some employment opportunities.To build a good credit score, focus on paying your bills on time and keeping your credit utilization low.Keep an eye on your credit with the help of credit monitoring services, some of which are free.
Why Is It Important to Have a Good Credit Score?
According to FICO, the average FICO credit score in the U.S. was 717 in October 2023, the most recent month for which data is available. That falls toward the high end of the “good” credit score tier.
FICO and VantageScore are the two most popular scoring brands. FICO scores are more commonly used by lenders, but it’s generally easier for consumers to check their VantageScores. Here’s a look at how FICO scores and VantageScores break down:
FICO Score
Credit Tier
800–850
Exceptional
740–799
Very Good
670–739
Good
580–669
Fair
<580
Poor
VantageScore
Credit Tier
781–850
Super Prime
661–780
Prime (similar to “Good”)
601–660
Near Prime
300–600
Subprime/Not Prime
Your credit score is based on multiple factors, including your payment history and how much of your available credit you actually use. Lenders look at your score when evaluating your application for a loan or credit card. A good credit score suggests that you’ve managed credit well in the past and are likely to pay back borrowed money.
Here’s a closer look at the benefits that can come with having good credit.
Better Chances of Credit Card and Loan Approval
A poor credit score can make it difficult to qualify for a credit card or loan. You may be limited to a secured credit card, which requires a deposit upfront, or a co-signed loan, which may be a financial burden to your co-signer.
With a good credit score, you’ll have a better chance of being approved for the best credit cards or the loan you want. You’ll still have to meet other requirements, such as having an acceptable income and debt-to-income ratio, but your credit score won’t stand in the way of approval.
Faster Approval
A good credit score could shorten the timeline for credit card and loan approval. Some credit card companies send out “pre-approved” offers after checking your score via a soft inquiry, and lenders may let you pre-qualify for a loan online.
These offers might more accurately be called “pre-screened,” since you’ll still have to fill out an application. But you may be approved more quickly since the company already knows you have good credit.
Lower Interest Rates
Interest is the cost you pay to borrow money. Lenders usually offer a range of rates for a particular loan product, with the lowest rates going to borrowers who have the strongest credit.
Qualifying for a low rate on a loan can make a huge difference in your cost of borrowing. For example, a lower interest rate on a mortgage could save you hundreds or even thousands of dollars over the life of the loan. Plus, paying less in interest may enable you to pay back your debt faster, which would free up more of your budget for other priorities.
Higher Credit Limits
A good credit score indicates that you’re likely to pay back borrowed money on time, so credit card companies may be willing to extend you a higher credit limit. This can actually make it easier to maintain a better credit score because you may have more available credit. If you get a high credit limit, however, be careful not to spend more than you can afford to pay back, or you risk racking up fees and interest and damaging your good credit.
Higher Loan Amounts
Lenders may offer higher loan amounts to borrowers with good credit scores. Some personal loan providers, like SoFi for instance, lend as much as $100,000, but may limit the amount offered to borrowers with fair, poor, or no credit.
Better Insurance Rates
Insurance companies often consider your credit score when evaluating your application and assigning your premiums for home and car insurance. A good credit score can help you qualify for discounts on your coverage.
However, some states have laws about how insurers can use credit when considering your application or setting rates—or whether they’re allowed to consider it at all. For example, insurers are not allowed to consider your credit when setting your premium for home insurance or when deciding whether to cancel your policy. If you’re not sure about the laws where you live, check with your state’s department of insurance.
Better Credit Card Rewards
Rewards credit cards offer a variety of useful perks, such as travel points and cash back. The best cards are typically reserved for borrowers with good or excellent credit. If you pay back your credit card balance in full each month, you can avoid interest charges while enjoying rewards on your purchases.
No Utility Deposits
Utility companies, such as gas, electric, and water companies, may require a security deposit of a few hundred dollars upfront if you have weak credit. A good credit score means you may not have to pay this deposit, which is one fewer expense and item to deal with when you move homes.
Better Rental Options
A prospective landlord may check your credit when you apply to rent a home. Having a good credit score can show them that you have a history of paying bills on time, which could help them feel more confident that you’ll pay your rent, which can improve your odds of approval.
Better Chance of Getting Some Jobs
Some employers will ask to check your credit when you apply for a job. A damaged credit history could affect your chances of getting hired. However, 12 states and several other jurisdictions, such as New York City and Washington, D.C. have legislation restricting the way employers can use credit to make hiring decisions.
Important
Companies have to get your written consent before conducting employment credit checks, and must tell you if something in your credit report is the reason they decide not to hire you.
Frequently Asked Questions (FAQs)
What Is a Good Credit Utilization Ratio?
It’s generally a good idea to keep your credit utilization ratio below 30%, but a lower ratio is even better. Your credit utilization, or the amount of credit you’re using compared to the total of all your credit limits, makes up 30% of your FICO score.
What Credit Score Do Landlords Look For?
There’s no universal minimum credit score that landlords look for. However, some landlords may prefer applicants with higher scores, such as those in the good, very good, or exceptional ranges. Landlords in more competitive areas or new buildings may require higher scores than those in less competitive areas or buildings.
What Is Considered a Perfect Credit Score?
The highest possible credit score is 850, but a score of 800 or higher is considered exceptional.
How Can I Know My Credit Score?
There are several ways you can check your credit score, including online at myFICO.com, with a credit monitoring service, or through your credit card company, if available. You can also review your credit reports from AnnualCreditReport.com, though they won’t show your score.
Why Did My Credit Score Drop?
There are many reasons a credit score could drop, such as if you’ve recently made late payments on a loan or increased your credit utilization. You could also see your score decrease if you apply for new credit with a lender that runs a hard credit inquiry or if you open a new account, which increases your “new credit” and decreases your average age of accounts. If nothing has changed in your financial situation, a drop in your credit score could be the result of inaccurate information or identity theft, so it’s wise to check your credit reports.
The Bottom Line
From faster loan approval to lower interest rates, there are a variety of benefits to having (and maintaining) a good credit score. If you’re looking to improve your score, be sure to pay your bills on time and keep your credit utilization ratio low.
If you have credit accounts in good standing, avoid closing them so as not to shorten your credit history and potentially increase your credit utilization (unless they have unwanted fees or issues). And when applying for new credit, try to keep your applications to a short window of time to prevent multiple hard credit inquiries from dinging your score.
If you’re starting from scratch, here’s how to build a good credit score with no credit history.
Read the original article on Investopedia.
Building and maintaining a good credit score can pay off in multiple ways
Amazon.com: Its Role in the U.S. Industry
Introduction
Amazon.com, often simply referred to as Amazon, has transformed from an online bookstore into a colossal global conglomerate that has fundamentally altered the landscape of retail, technology, and numerous other industries. Founded in 1994 by Jeff Bezos, Amazon’s rapid growth and diversification have made it a central player in the U.S. economy. Its impact is felt across various sectors, including e-commerce, logistics, cloud computing, entertainment, and even artificial intelligence. This article explores Amazon’s role in the U.S. industry, examining its influence, achievements, and the challenges it faces.
The Rise of Amazon.com
Origins and Early Growth
Amazon began as an online bookstore in Bezos’s garage in Bellevue, Washington. The vision was simple but revolutionary: to create an online platform where people could buy books. Bezos recognized the potential of the internet to disrupt traditional retail and chose books as his starting point due to their wide appeal and ease of distribution. By offering a vast selection and competitive prices, Amazon quickly gained a foothold in the market.
The company’s initial public offering (IPO) in 1997 marked the beginning of its journey toward becoming a dominant player in the U.S. and global markets. Amazon’s early success was driven by its focus on customer satisfaction, an extensive inventory, and a commitment to fast and reliable delivery. This focus laid the foundation for its expansion into other product categories and services.
Diversification and Expansion
Amazon’s diversification strategy began with the introduction of new product categories, such as electronics, toys, and apparel. This move positioned Amazon as a one-stop shop for consumers, significantly expanding its customer base. The company also introduced its marketplace platform, allowing third-party sellers to offer their products alongside Amazon’s own inventory. This not only increased the variety of products available but also created a new revenue stream for the company through commissions on sales.
One of the most significant milestones in Amazon’s diversification was the launch of Amazon Web Services (AWS) in 2006. AWS provided cloud computing services to businesses, enabling them to rent computing power and storage rather than investing in expensive infrastructure. This service quickly became a cornerstone of Amazon’s business, contributing significantly to its profitability and establishing Amazon as a leader in the tech industry.
Amazon’s Role in E-Commerce
Transforming Retail
Amazon’s impact on the retail industry cannot be overstated. It has revolutionized the way consumers shop, shifting much of retail activity from brick-and-mortar stores to online platforms. The convenience of shopping from home, coupled with Amazon’s vast selection and competitive pricing, has led to a fundamental change in consumer behavior. This shift has forced traditional retailers to adapt, leading to the rise of omnichannel strategies that integrate online and offline sales.
The concept of “one-click shopping,” patented by Amazon in 1999, further streamlined the online shopping experience. This innovation reduced the friction in the purchasing process, contributing to higher conversion rates and reinforcing Amazon’s dominance in e-commerce. Additionally, Amazon Prime, launched in 2005, offered customers free two-day shipping and other benefits for an annual fee, further solidifying customer loyalty and increasing the frequency of purchases.
Impact on Small Businesses
While Amazon has provided opportunities for small businesses through its marketplace platform, it has also posed challenges. On the one hand, small businesses gain access to a vast customer base and the logistics infrastructure that Amazon offers. On the other hand, they face intense competition, not only from other third-party sellers but also from Amazon itself. The company’s ability to undercut prices and its control over the marketplace platform have led to concerns about fairness and market power.
Moreover, Amazon’s algorithms and data-driven approach to retail have raised questions about the transparency of how products are promoted and priced on the platform. Small businesses often struggle to achieve visibility without spending on Amazon’s advertising services, which can be costly. Despite these challenges, many small businesses continue to rely on Amazon as a vital sales channel, underscoring its central role in the U.S. retail industry.
Amazon in the Logistics and Supply Chain Industry
Revolutionizing Logistics
Amazon’s impact extends beyond retail into logistics and supply chain management. To fulfill its promise of fast and reliable delivery, Amazon has invested heavily in building a sophisticated logistics network. This network includes a vast network of fulfillment centers, advanced robotics, and a growing fleet of delivery vehicles, including drones.
Amazon’s logistics capabilities have set new standards for the industry. The company has pushed the boundaries of what is possible in terms of speed and efficiency, challenging traditional logistics providers like FedEx and UPS. Amazon’s commitment to customer satisfaction has driven innovations such as same-day and even one-hour delivery in select areas, further raising consumer expectations.
In-House Logistics Services
In recent years, Amazon has taken steps to reduce its reliance on third-party logistics providers by expanding its in-house delivery capabilities. The launch of Amazon Logistics, a service that uses independent contractors to deliver packages, is a testament to this strategy. This move has enabled Amazon to exert greater control over the delivery process and reduce costs.
However, this expansion has not been without controversy. Amazon’s use of independent contractors has sparked debates about labor practices and the gig economy. Critics argue that Amazon’s business model places financial and physical burdens on its delivery drivers, who are often classified as independent contractors rather than employees. This classification exempts Amazon from providing benefits and protections typically afforded to employees, such as health insurance and minimum wage guarantees.
Amazon Web Services: The Backbone of the Internet
Dominating Cloud Computing
Amazon Web Services (AWS) has emerged as one of the most significant contributors to Amazon’s success. As the leading provider of cloud computing services, AWS powers a vast portion of the internet, supporting everything from startups to large enterprises. Its services include computing power, storage, databases, machine learning, and more.
AWS’s dominance in cloud computing has had a profound impact on the tech industry. By providing scalable and cost-effective solutions, AWS has lowered the barriers to entry for new businesses, fostering innovation and entrepreneurship. Companies no longer need to invest heavily in physical infrastructure; instead, they can rent the necessary resources on demand from AWS.
Economic Impact and Innovation
The success of AWS has not only boosted Amazon’s financial performance but also contributed to the broader U.S. economy. AWS has created jobs, driven innovation, and supported the growth of numerous tech companies. Its services have become integral to the operations of many businesses, from streaming services like Netflix to financial institutions and government agencies.
AWS’s role in advancing technologies such as artificial intelligence and machine learning has also been significant. By making these technologies accessible through cloud services, AWS has enabled companies to develop new applications and services that were previously out of reach. This has spurred growth in sectors such as healthcare, finance, and entertainment.
Amazon’s Influence on Entertainment and Media
Amazon Studios and Prime Video
Amazon’s foray into the entertainment industry began with the launch of Amazon Studios and Prime Video. These platforms have become key players in the streaming wars, competing with giants like Netflix, Disney+, and HBO Max. Amazon Studios produces original content, including critically acclaimed series like The Marvelous Mrs. Maisel and The Boys, as well as feature films.
Prime Video, available as part of the Amazon Prime membership, has become a major driver of subscriber growth. By offering a mix of original content and licensed programming, Amazon has been able to attract a diverse audience. The company’s investment in high-quality content has not only boosted its streaming service but also positioned it as a significant player in Hollywood.
Impact on the Publishing Industry
Amazon’s origins as an online bookstore continue to influence the publishing industry. The company has become the largest bookseller in the world, both in physical books and e-books. The Kindle, Amazon’s e-reader, revolutionized the way people consume books, making digital reading mainstream.
However, Amazon’s dominance in the book market has raised concerns among publishers and authors. The company’s pricing strategies and negotiation tactics have led to disputes over revenue sharing and control. Amazon’s influence over the publishing industry extends to self-publishing, where its Kindle Direct Publishing platform allows authors to bypass traditional publishers and reach readers directly. While this has democratized publishing, it has also led to an oversaturation of the market and challenges in quality control.
Challenges and Criticisms
Regulatory Scrutiny
Amazon’s immense size and influence have made it a target for regulatory scrutiny. In the U.S. and abroad, lawmakers and regulators have raised concerns about the company’s market power, labor practices, and treatment of third-party sellers. Antitrust investigations have been launched to determine whether Amazon engages in anti-competitive behavior, such as favoring its own products over those of third-party sellers on its platform.
The company’s expansion into various industries has also led to concerns about its dominance and potential to stifle competition. Critics argue that Amazon’s control over data, logistics, and retail gives it an unfair advantage, making it difficult for smaller companies to compete. In response, there have been calls for greater regulation and even the potential breakup of Amazon into smaller entities.
Labor Practices and Workers’ Rights
Amazon’s labor practices have come under intense scrutiny, particularly in its fulfillment centers and delivery network. Reports of grueling working conditions, high injury rates, and inadequate breaks have sparked widespread criticism. Workers have organized protests and strikes, demanding better pay, safer working conditions, and the right to unionize.
The company’s use of technology to monitor and manage workers has also raised ethical concerns. Amazon’s reliance on algorithms to track productivity and enforce performance targets has been criticized for creating a dehumanizing work environment. The company’s resistance to unionization efforts has further fueled debates about workers’ rights and corporate responsibility.
Environmental Impact
As one of the largest companies in the world, Amazon’s environmental impact is significant. The company’s vast logistics network and rapid delivery services contribute to carbon emissions and packaging waste. Amazon has faced criticism for its role in driving consumerism and its contribution to environmental degradation.
In response, Amazon has pledged to become more sustainable. The company launched the Climate Pledge in 2019, committing to reach net-zero carbon emissions by 2040. Amazon has also invested in renewable energy, electric delivery vehicles, and sustainable packaging. While these efforts are a step in the right direction, critics argue that more needs to be done to address the environmental impact of the company’s operations.
