6 Ways Your Credit Affects You

Posted January 4th, 2010 by LaToya Irby

Some people ignore their credit score until it’s time to find a loan. In the past, that’s what credit scores were primarily used for. However, you might soon get a rude awakening (if you haven’t gotten one already). Credit scores are being used by more and more businesses to make decisions about you.

#1 - Your insurance rate

It sounds absurd, but your credit score impacts whether you get insurance and how much you pay for it. Insurance companies argue that people with lower credit scores tend to file more claims. To make up for the risk, they’ll charge you a higher rate. Expect all types of insurance companies – auto, life, and homeowner’s – to check your credit score as they decide your annual premium.

#2 - Your credit card approval and terms

If you’re looking for a new credit card, the card issuer uses your credit score to figure out whether to approve your application for credit and at what interest rate. Lower credit scores could mean you get a higher interest rate, or even denied for a credit card.

#3 - Your existing card’s interest rate, credit limit, and whether you keep your account

Your current credit card issuers will check your credit score periodically to determine whether to change your account terms. A low credit score might result in an increase in your interest rate, a reduction in your credit limit, or worse, a cancellation of your credit card account.

#4 - Your rental application approval

Landlords and apartment complexes use your credit score to decide whether to approve your rental application and how much your security deposit will be. If you have a low credit score, you could pay a higher security deposit to move into a new apartment. Serious credit blunders will get your rental application denied.

#5 - Your job status

Your credit influences whether you get a job. Employers are increasingly checking credit as part of the application process. Serious credit blemishes, like unpaid debt collections, high credit card debt, or bankruptcy could get your employment application denied. Yes, you could end up unemployed because of a poor credit.

#6 - The promotion or raise you’re up for

Potential employers aren’t the only ones who check your credit. If you’re up for a raise or promotion, your employer might check your credit score before making the changes. Credit checks are common for financial and top executive positions, but that doesn’t mean an employer won’t use them for other types of jobs. (Don’t worry, though—a credit check won’t take you by surprise. Employers are legally required to let you know about an employment credit check ahead of time.)

It’s never "out of sight, out of mind" when it comes to your credit score, because it’s never out of sight. More businesses could make the argument that your credit score matters to them, so it’s always important to try and improve a bad credit score and maintain a good one. Note that not every financial activity, like investing in the stock market or forex trading, requires good credit. But you should really have the rest of your financial ducks in a row before risking your money on speculative investments.

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Comments

I am still not sure how

Submitted on January 4th, 2010 by Visitor (not verified)

I am still not sure how homeowners insurance is affected by credit score. It doesn't seem like someone who pays their bills on time is less likely to have their home hit by a tornado.

I do wish we could get a free copy of our ChoicePoint scores instead of having to pay $25 to get them.

Yes; I fully agree with you

Submitted on January 5th, 2010 by Wayne Nickason (not verified)

Yes; I fully agree with you on getting your personal credit report FREE. How else ais a person suposed to correct his or her credit problems if they don't know who is causing the problem in the first place. IT'S YOUR OWN CREDIT THEY ARE PLAYING WITH, AND YOU SHOULDNT HAVE TO PAY FOR A REPORT ON YOUR OWN CREDIT RATING. THAT IS WHAT COMPANIES PAY FOR IN THE FIRST PLACE. WHY SHOULD WE HAVE TO PAY AGAIN???????????????????????.

Everyone is entitled to a

Submitted on January 6th, 2010 by Carrie Davis

Everyone is entitled to a free credit report from each bureau every year. You can get yours by visiting the government-sponsored website www.annualcreditreport.com. It won't give you your credit scores for free though, you'll have to pay a fee if you want to see those.

Yes, but when you already

Submitted on January 6th, 2010 by Wayne Nickason (not verified)

Yes, but when you already have bad credit, how do you persuade the companies like trans union or equifax to send you a list of the companies that are sending them reports on yourself to you. it's your credit they are playing with and i think that a person should have the right to kknow who is wrecking his or her credit rating by sending in debts that have already been paid off. a person can't do anything untill they know what the problem is an who is sending these reports so we can adress the problem and come up with a solution

I personally don't like

Submitted on March 20th, 2010 by Visitor (not verified)

I personally don't like credit cards. I pay with cash if I want something, which means I save, then purchase. And yes, I also have student loans that I owe, but my credit score is not the greatest. I didn't think banks and credit bureaus could affect my obtaining a job. So how am I to get a job with a low credit score? By getting credit cards? By being in good debt in the banks eyes, with credit cards? I can't even get a house because I hate credit cards and my credit is low, so I'm a slave to my landlord. All my payments go to the landlord each month, which makes them richer, and leaves me with no equity. And believe me, I WANT EQUITY. I want to pay payments on a home and someday own it. It upsets me to think that potential employers possibly wouldn't hire me because of a credit score. Do they wish for me to be in such huge debt to obtain a credit score? Then they can hire me knowing I am desperate for the extreme low wage they are willing to dish out. So it's the smart people who pay with cash that are deemed as unemployable, or not allowed to have a house. So living prosperous is bad in the eyes of employers and banks. I get it now. This is what they are clearly indicating. It makes perfect sense, the banks make their billions in profits, same as the insurance companies. Interesting scam. Now I see why the banks own the credit bureaus. So if we all don't use the banks, so they can make their huge profits, then they treat us all like human slaves. We don't get a little bank treat called credit, therefore we don't get employment. And yet, now with the country going under because of all these banks literally hoarding the billions in bail outs, they won't budge and extend loans for homes or anything. So they are destroying this country by hoarding money. That's pretty bad, considering that the flow of money is which makes our economy run. And since the banks run the credit bureaus, they own everyone. Banks shouldn't run this country, they shouldn't run the credit bureaus. In fact, credit bureaus should be banned. Everyone should be able to get a job based on our smarts. Not based on what debt we either have, or don't have. The banks are still not extending loans, they are making it by with all the late payments they are receiving because people don't have jobs, still the banks profit, it's called late payment fees. Doesn't anyone understand this viscous circle the banks have created?

You make some very good

Submitted on March 22nd, 2010 by Carrie Davis

You make some very good points. Those like you, who never use credit cards and only use cash, probably won't have strong enough credit to obtain a mortgage. But there are other ways to build credit. If you have student loans, for instance, make sure your lender is reporting those debts to the credit bureaus. As to the banks owning the credit bureaus, I'm not sure exactly in what sense you mean. Banks report their information to the Experian, TransUnion, and Equifax, but they do not own or operate those entities. Also, there is a lot of debate around whether employers actually judge you based on your credit SCORE. Usually, you sign a waiver that lets them pull your credit report, and as long as there is not anything glaring that could signify you are in financial straits (like a court judgment or bankruptcy), then your credit history (or lack thereof) should not impede on your ability to get the job.