You’ve probably heard that your credit score is an important number in your financial life, but how exactly is it used? Here are five situations in which lenders or creditors will almost certainly look at your credit report, along with what impact a good or bad score can have on your ability to sign on the dotted line.
Renting a Residence
Anyone who oversees or owns a rental property will almost certainly run a credit check before offering you a lease agreement. Because rents are usually substantial and the eviction process is costly and complex, landlords want to be confident that you won’t skip out on your lease payments. As part of the rental application process, you’ll almost certainly be asked to sign a release allowing the lessor to access your credit report, and landlords may refuse to rent to you or demand larger deposits if you prove to have poor credit.
Buying a Home
If you’re looking into buying a house or apartment rather than renting, be aware that your credit score will be a big factor in determining whether you qualify for a mortgage. While a poor score won’t necessarily prohibit you from getting a home loan, it can have a detrimental impact on the interest rate you are offered. With a higher score, you may not only get a better annual rate but may also be able to make a lower down payment than you would if your score were on the low end.
Signing Up for Utilities
Whether you rent or purchase a home, the need for a good credit score doesn’t end with finding a roof to live under. Many utility providers also routinely look into your credit rating before they’ll turn on your gas, electric, water, internet, or cable services. Without good credit, you may be asked to provide a letter of guarantee from someone who will pay your bills in the event you’re unable to do so, or you may be required to submit a deposit payment to each of these companies before they’ll flip the switch.
Many insurance providers believe that there is a link between your credit score and how likely you will be to file a claim on your automobile or home insurance policy. If you are assessed to be at a greater risk of filing claims due to your credit score, you may be offered higher rates than those with better scores. Only a few states prohibit the use of your credit score in determining your insurance rates, so depending on where you live you can probably count on your score impacting how much you pay each month.
Getting a Job
Even your potential employer may look into your creditworthiness as a way of determining if you are a dependable hire. While employers aren’t privy to your credit score, they are permitted to view your credit report to identify if you have had any late payments, foreclosures, or bankruptcies, and they can see if you have had accounts sent to collection. Although your state may have restrictions on how an employer can use credit information when making hiring decisions, it’s important to know that your credit use may potentially impact how appealing you are to potential employers.
Your ability to do everything from landing your dream job to settling into the perfect home may rest in some part on what’s reflected in your credit report. Although poor credit won’t necessarily put you out of the hunt altogether, if you have a great credit score almost anything you attempt to do financially will be that much easier to accomplish.