Skip to main content

What Is My Credit Score Used For?


Two young adults discuss who looks at your credit score and how credit is used.
Just like your LinkedIn profile, people are looking at your credit. Some of them want a quick way to judge whether or not you are responsible. Others want to know if you'll pay them back if they lend you money.

Lenders And Credit Card Companies
If you have poor credit, you could get interest rates nearly 60% higher than the national average because lenders see you as bigger risk.

Insurance
What does a low credit score have to do with your driving abilities? Insurance industry research has shown that those who manage money responsibly are more responsible in other parts of their lives.

If you need auto, renters or homeowners insurance, insurers will look at your credit score. And a low score could mean you'll pay up to $22,815 higher premiums over your lifetime than someone with a stellar score.

Utility Companies
Part of getting your own place is paying for utilities like gas and electricity - and utility companies want to make sure you're good for it.

"Some [utility companies] won't extend credit without a large deposit if you have a negative history," says Gerri Detweiler, a credit expert with Credit.com.

CellPhones
When you get a cellphone, the provider might check your credit report to see whether you've been paying your bills on time. If you have a spotty credit history, they may require you to put down a cash deposit as high as $500 before giving you an account.

Landlords
To many landlords, a lower credit score means you're more likely to be late on rent or miss it altogether. That's why New Jersey landlord Jerry Lynch checks his potential renters' credit scores.

"If they haven't paid people they owed money to in the past, there's a very reasonable chance they won't pay me," says Lynch.

Like many landlords, when Lynch encounters possible renters with bad scores, such as college students or young adults who have never used credit, he requires them to get a co-signer on the lease.

Employers
Thanks to the Fair Credit Reporting Act, an employer has to ask your permission before pulling your credit report; and they must disclose if they don't hire you because of something on the report.

Although studies haven't proven that your credit score is connected to your job performance, poor credit can be a red flag. Some employers think you'll have a hard time managing the company's money if you're struggling to manage your own.

It gets even more serious for government employers like the armed forces.

"Members of the military can even lose security clearance or be deemed ineligible for promotions if they have credit issues," says Will VanderToolen, director of counseling services at AAA Fair Credit Foundation in Salt Lake City.

So, to sum it up, you have to keep your credit score looking good. Trust us when we say that it makes life easier.

Comments

Popular posts from this blog

How To Build Savings

It only takes one financial emergency to convince you of the importance of savings. It's recommended that everyone aim to save 3- to 6-months' worth of expenses, which might seem like an impossible target, but every achievement begins with setting a goal and taking the first steps toward reaching it. Why Save? Life is full of surprises - an accident, injury, illness, home repair, legal issue or even a fun opportunity such as an unexpected vacation, festival or concert are all good reasons to build up savings. With no money saved, your options are limited to earning the money or borrowing it, which usually means paying interest. Learning how to build a savings account makes you self-sufficient. You can stand on your own without relying on anyone else to bail you out. Smart Small Saving gets easier and more enjoyable the more you do it. At first, you might feel deprived if you have to trim expenses, but this feeling quickly subsides when you see your account balance rising...

5 Ways Higher Interest Rates Could Impact You

The Federal Reserve has raised its target interest rate after five years of record lows. This means you may be at risk of paying more interest on your mortgage, private student loans and car note if you're looking to buy. Here's a roundup of what this means for you. 1. You could see more return on your savings. Let's start with the good news. Your savings account, money market and Certificates of Deposit could start increasing at a higher interest rate. More money in your savings account is great news! But keep in mind that you won't necessarily see this effect immediately, interest will accrue visibility and compound over time. 2. If you plan on buying a car, your payments could be costly. If you're looking to buy or lease a new car, make sure you pay close attention to your interest rate. The higher your interest, the more expensive your car note will be. This is because when you finance a car, you're borrowing from the dealership or loan vendor. Esse...

Earnest Offers A New Way To Save On Your Student Loans

It's so frustrating: You're financially responsible, but you still can't get approved for student loan refinancing. A company called Earnest could change that. It's easy to look at the state of student debt in the United States and get thoroughly bummed out. In 2012, 71 percent of new four-year college grads had student debt, with an average debt of $29,400, according to The Institute For College Access & Success. That's a big chunk of student loan debt. To you, that debt may represent the years of work it will take you to pay it off. But to entrepreneurs like Louis Beryl, it represents an enormous opportunity to help graduates like you find a way to save on your student loans. Beryl is the cofounder of Earnest, a student loan refinancing lender that hopes to reward financially responsible graduates with flexible terms and lower interest rates (APRs - with auto pay - are between 2.55 and 6.03 percent). A different approach to underwriting In the p...