You might have heard before that “the world runs on money.” But really? The world runs on credit.

As of late 2024, American households held a total of $5.1 trillion in non-mortgage debt, according to Experian—and $1.2 trillion of that was on credit cards.

With credit playing such a big role in our financial lives at large, a credit score is a very powerful number. It can impact everything from where you live to what you drive to how much you owe the utility companies.

Yet, for many, those three little digits are an enigma. So if you’re one of the many people wondering, “Why is it important to have good credit?” you’ve come to the right place. 

Sure, KashKick is known as an app that pays members for playing games, taking surveys and claiming deals. But what you might not realize is we’re deeply committed to helping our members improve all aspects of their financial lives. In fact, you can earn Kash rewards when you use apps to help build your credit!

So let’s dig in and find out exactly how credit scores work, where they come from and how you can whip yours into shape (no matter where you’re starting from).

What Does Good Credit Actually Mean?

Good credit refers to your credit score, a rating that looks at your credit history to determine whether you’re likely to be the kind of customer a creditor or lender wants to work with.

For an easy way to gauge your creditworthiness, companies run your credit history through a formula to assign a score. These formulas vary by credit scoring model. In the U.S., we have two: FICO and VantageScore. To keep things simple, let’s focus on FICO, the more widely used model.

Here’s how FICO calculates your credit score:

• Payment history (on-time and late payments): 35%
• Credit utilization (credit card balances vs. total available credit): 30%
• Length of credit history: 15%
• Credit mix (different types of credit and loans): 10%
• Recent credit inquiries (applications for credit or loans): 10%

These factors will determine your credit score, which ranges between 300 and 850. Depending on your score, your credit can be considered poor, fair, good, very good and exceptional. Take a look at the breakdown:

• Less than 579: Poor
• 580–669: Fair
• 670–739: Good
• 740–799: Very Good
• 800 and above: Exceptional

If you don’t have any reported activity, you’ll have no credit score. To creditors and lenders, that’s just as bad as having a poor credit score because they have no way of knowing how you’ll use credit and whether or not you’re likely to pay them back.

Why Good Credit Is So Important

So why is it important to have good credit? A strong credit history and a high credit score can open a lot of doors.

A higher credit score could help… 

⬆️ Increase Your Chances of Loan Approval

This includes home mortgages, auto loans and personal loans. With a higher credit score, lenders see you as a lower risk—and more likely to make your payments on time.

⬇️ Lower Interest Rates

Good credit can help you get approved for better interest rates on loans. Interest rates can have a huge impact on your monthly payments. 

A LendingTree analysis found that raising a credit score from “fair” to “very good” could save borrowers more than $39,000 over the lifetime of a loan.

⬆️ Increase Your Chance for Credit Card Approvals

A good credit score can help you qualify for credit cards. Ironically, these credit cards can help you continue to increase your score. Plus, you might be interested in credit cards to earn cashback or travel rewards.

Bad credit can limit your options—and even come with higher fees.

⬆️ Increase Your Credit Limits

If you have a higher credit score, you can often get approved for higher credit limits. This, of course, allows you to spend more on your credit card, but it can also help lower your credit utilization rate, a key factor that makes up your credit.

For example, if you have a $5,000 credit card balance with a $10,000 limit, your credit utilization rate is 50%. Increase that limit to $20,000, and your credit utilization rate is now 25%. (For reference, 30% and below is generally considered a good rate.)

⬆️ Increase Your Housing Options

Many landlords perform background and credit checks on potential renters. If they see you have a low credit score, they may worry you won’t make your rent payments on time. This, unfortunately, could lead to a higher deposit or even application denial. (Here’s what you need to know if this happens.)

⬇️ Lower Your Insurance Rates

Some auto and home insurance companies use credit-based insurance scores to determine your premiums. A good credit score can help lower those rates, especially in a time when car insurance rates continue to rise.

⬇️ Lower Your Utility Deposits

Lower credit scores can often help you secure lower (or no) deposits when you go to set up utilities. This could include water, electricity or cable.

⬆️ Increase Your Job Opportunities

Although this isn’t super common, some employers run credit checks, especially if you work in financial or security-sensitive fields.

⬆️ Increase Your Flexibility and Emergency Options

In case of an emergency, good credit can ensure you have the ability to borrow money to cover unexpected expenses, like an unexpected trip to the vet, a major car repair, home repairs caused by natural disasters and more.

How to Build and Maintain Good Credit

When it comes to building and maintaining good credit, it’s important to look at the factors that make up your credit score.

If you have a low or no credit score, take these six steps:

1. Make On-Time Payments

Missing payments for loans, credit cards, rent or utility bills can significantly lower your credit score. 

Start here if you want to raise a low score: Work with utility providers, creditors, lenders and debt collectors to make debt-payoff plans. Your credit will improve over time as you make payments, but just settling on a plan can make a big difference, too.

2. Keep Your Balances Low

Credit card companies want to know you’ll use your credit card to make purchases (retailers pay them a fee every time you swipe). But they also know it’s harder to repay debt the more you carry. They look at credit utilization to see how much of your available credit you carry as debt at any given time.

If you have a low credit score, take a look at your credit utilization across all credit cards. Lenders generally like to see this number between 1% and 30%. 

If you can’t reduce your spending, you can lower your utilization by raising your credit limit. Ask creditors for a higher limit if you’ve been using a card for a while. Or open a new card—but don’t use the extra credit!

3. Keep Old Accounts Open When Possible

Lenders like to see you’ve got some experience using credit, so the older your credit history, the better. 

Your credit history (or “credit age”) is measured based on the date you opened your oldest loan or credit account. So you can boost your score by keeping old credit cards and lines of credit open, even if you cut up the cards and don’t want to spend on them anymore.

4. Mix Up Your Credit Types

Lenders want to see a mix of revolving credit and loans, so having a variety of credit types can bump your score up a little bit.

5. Avoid Opening Too Many New Accounts At Once

When you apply for a new credit card or loan, the lender checks your credit history through what’s called a “hard inquiry.” On your credit report, it shows that you applied for credit. 

Lenders don’t want to see you applying for too much credit too often or all at once, because all that debt could be hard for you to repay. A good rule of thumb is to wait three to six months between credit applications.

6. Use Tools Like Secured Cards or Credit-Builder Loans

If you’re working to rebuild your credit, secured credit cards and credit-builder loans can help you boost your score. Both are designed for people with limited or damaged credit and allow you to create a positive payment history over time—which is essential for improving your credit profile.

For example, with the Firstcard Secured Credit Builder Card, you’re pre-approved, so no credit checks are necessary. (Remember, those can damage your credit score.) You’ll put money into the account, then build your credit score by using the card and paying it off in a timely manner.

Even better? When you sign up through KashKick, you can get a kash reward! 

Your Journey to Good Credit

Whether you’re seeking approval for credit or navigating non-financial realms like housing and employment, credit can determine the outcome.

Your credit score is more than a number. It’s a silent influencer shaping your financial opportunities.

Mastering your credit involves understanding and actively managing factors contributing to your credit score, transforming it into a tool to expand your access to resources.