Credit scores are based on your information in your credit report and they help companies understand whether or not you are likely to fall behind on repayments. Credit scores can say a lot about your financial habits, with a higher score indicating that you are more likely to pay bills on time, and are therefore more creditworthy. Creditors will often check your credit score when they receive your application for a loan, credit card or similar type of financial product. However, credit scoring systems can impact your life in several further ways outside of borrowing money.
Why is Your Credit Score Important?
Your credit score is important because your credit can impact many different areas of your life. Good credit makes it easier to qualify for credit cards and loans, allowing you to get premium financial products with benefits and make larger purchases over time with low-interest rates. But the benefits of a good credit score can go well beyond borrowing money. Some other areas where credit scoring can impact your life include:
Buying a House
You may not be surprised to hear that credit scoring systems are used when you apply for a home loan or mortgage. There is usually a minimum requirement of a score of at least 500 to qualify for a mortgage with a 10% down payment, and it will be even higher if you want to put a lower down payment down when buying your house. The higher your credit score, the easier it will be for you to get a home loan with the best interest rates.
Some employers will check your credit as part of the hiring process. Employers might want to be sure that you are financially responsible before they offer you a position, and that you don’t have debts that could impact your judgement at work. While your credit score itself does not impact your employment, your credit report might. However, employers are not able to pull your credit for employment checks without your permission beforehand.
Whether you’re not ready to buy a house or prefer to rent, your credit score could impact your ability to find somewhere to live. Many property management companies and landlords will want to check your credit before they agree to rent you an apartment or house. Having a low credit score can make getting approved more difficult or it could mean that you end up having to pay a larger security deposit.
Insurance is a necessity on many things that we own including vehicles, homes and gadgets. In many states, your insurance premiums are determined using a credit-based insurance score. Although these scores are different from your regular consumer credit score, they are based on your credit history. If you have a history of being responsible with money and paying your bills on time, you might be offered lower insurance premiums.
Your credit score and rating doesn’t just impact your ability to get loans and credit cards; it can have an impact on many other areas of your life.