For most people, their credit score is simply related to their credit card limits and interest rates. However, your score affects more than your ability to obtain and use credit cards. In fact, your credit score can affect your ability to rent a car or lease an apartment, among other things. While it may seem unfair to be judged by such a small snapshot of your life, it is the way most companies and financial institutions determine how responsible you are. Since most organizations do not have the time to go through your life story, they use your credit score to make a fast determination. A low credit score may tell a potential landlord that you will not be a responsible renter. If you have applied for lots of loans, potential lenders may think you are low on money and desperate for credit.
Since your credit score is so important, it is imperative you understand how it will affect your life so you can take the steps necessary to protect your credit.
Buying a Home
Even if you can put down a large sum of money, a financial institution will need to know whether you are able to repay your mortgage. While a low credit score may just mean you will have a high interest rate on your credit card, it can prevent you from buying a home altogether. For many people, their house is their most valuable asset and buying a home is a major life achievement. If you are thinking about buying a home, make sure you have an excellent credit score.
Many believe insurance companies offer everyone the same rates, but this is not the case. If you have a poor credit score, you could be paying more than others for the same type of insurance. If you are in the market for home insurance, some companies may not even offer you insurance if your credit score is too low. Insurers want to see a positive credit history so they know they will receive on-time payments.
Utilities, Phones and Other Services
When you sign up for utilities, a cell phone or television service, your provider will check your credit to determine whether you need to pay a deposit. If you have a poor credit score, you will likely need to make an upfront payment or pay a deposit to get services, but those with excellent credit may not need to pay these upfront costs.
Renting a Car
If you have poor credit, you may not be able to rent a car. Some rental companies run a credit check, and this will result in a hard pull on your credit report, which may slightly decrease your score. Even if you want to pay with your debit card or cash, your score may still get checked. Thus, make sure your score is good beforehand, or you may not be able to rent the car when you need it.
Now that you have seen how important having a good credit score is, you will want to understand what factors affect your score. Bankruptcies and foreclosures will obviously negatively affect your credit score. Other, less obvious issues that can hurt your credit score are using over 30% of your credit limit and applying for many new credit accounts in a short period of time. You will also want to pay your bills on time and avoid overusing your cards.
Hopefully, knowing how important your credit score is will help you stay on top of your finances. Check your score on a regular basis, and if you are planning a major change in life, such as buying a house, definitely make sure your credit is excellent. Don’t miss out on great opportunities because of your score.