People who think that their credit scores don’t really matter often have rude awakenings when applying for jobs, looking for car insurance or trying to rent apartments. In addition to playing a pivotal role in the types of loans and lines of credit that a person can get, credit scores are often taken into consideration by employers, insurance companies and many others. At the end of the day, a low credit score can have a very serious impact on a person’s finances. A high credit score, on the other hand, can open up many great doors and make life a lot easier. Learn more about how credit scores impact a person’s finances below.
Renting a Place
Landlords prefer tenants who pay in full and on time. What better way to assess a person’s ability to do so than by checking his credit score? People often assume that credit scores don’t come into play when renting a house or an apartment, but that simply isn’t true. In some cases, a landlord may reject an application based on a low credit score. In other cases, a person with a low credit score may have to pay first and last month’s rent along with a larger security deposit. In the end, a bad score makes it more difficult and more expensive to rent a place.
Buying a Home
The odds of being approved for a mortgage at all are decidedly slim with a poor credit score. That’s especially true these days, in the wake of the housing crisis. To take advantage of the perks of home-ownership, which are considerable, it’s crucial to have a decent credit score. Even options for people with lower incomes or smaller down payments, like FHA loans, may be out of reach for those who have especially bad credit scores.
Enjoying Low Interest Rates
It’s true that interest rates for mortgages are at record low. Not everyone gets to enjoy them though. Even if a person is approved for a mortgage with a so-so credit score, he’s sure to pay more in interest than someone with top-notch credit. The same thing applies to credit cards, auto loans and other forms of credit. To mitigate the added risk that they are taking, lenders charge higher interest rates to people who have low credit scores.
Paying Less for Vehicle Insurance
Many factors are taken into consideration when car insurance premiums are calculated. People don’t often realize it, but credit scores are often considered as well. Insurance companies view a poor credit score as a sign of irresponsibility. Someone with a bad credit score is more likely to be involved in an accident and file a claim. People who aren’t responsible about their finances tend to be less responsible behind the wheel as well, so they tend to pay more for car insurance. Get vehicle insurance quotes online.
Finding a Job
In the past, people only had to worry about their credit scores when applying for jobs that required high security clearances and other special circumstances. That’s changing. More employers are looking at credit scores than ever. In today’s tough job market, a low credit score can disqualify a person from many solid opportunities. A low credit score can be a red flag to a prospective employer. It may indicate that a person is more likely to commit embezzlement or to accept bribes. It may also simply demonstrate that a person is irresponsible, which makes them a less attractive candidate in general.
Getting Excellent Terms
In addition to dealing with higher interest rates, people with not-so-great credit scores usually have inferior terms. For example, someone with a great credit score may be offered a special introductory rate or may qualify for credit cards that come with special perks. People with poor credit scores have to take whatever they can get, and the pickings are usually very slim.
A poor credit score is a serious liability. In addition to affecting a person’s ability to get a job, rent an apartment or buy a home, a low credit score can have a very negative impact on his finances in general. In more ways than one, maintaining a great credit score is extremely important.
When I was younger, I never cared about my credit score. Now that we’re buying our first house, I am so grateful that I worked so hard to improve it the last few years. 🙂 Now we’ll be getting a much lower interest rate.
That is great to hear. I too have had issues in the past with my score and it has taken a lot of work to get it back to normal. I do all I can now to keep it in check.