5 Unexpected Ways Your Credit Score Could Impact Your Life
Think having poor credit is only a problem if you need a loan? Think again.
You know that bad credit can often translate to high interest rates, unfavorable payment terms and few options when you’re looking to get a loan or apply for a credit card. But, your credit score can also affect so much more than that.
Here are five surprising ways that your credit score may be influencing your everyday life:
1. Your insurance premiums
Have a great credit score? Insurance companies will reward you for that. But if your score is bottoming out, you’ll likely pay a hefty sum to get coverage.
Most major insurance companies use what’s called a credit-based insurance score in determining your auto, home or renter’s insurance. Why? Because, time and again, credit history has been shown to be a reliable predictor of how likely someone is to file an insurance claim.
Legislation varies by state when it comes to how your insurer can use your score. If you’re a resident of Illinois or Indiana however, bad credit can cost you dearly. Drivers there who suffer from subpar credit are typically hit harder with insurance surcharges than residents of other states.
2. Your rental
Moving in to your first place? Relocating for work? Or hoping to upgrade to a nicer apartment? Your rental dreams may come crashing down if you’re sporting a low credit score.
Your landlord wants to be paid her rent on time. So a killer credit score gives her confidence that you take debt repayment seriously…and that you are more likely to consistently pay your rent.
If your credit is damaged, you’ll likely need to take some additional steps to get your name on the lease. For instance, you may need to find a co-signer, pay an extra-large security deposit or make advance payments. In some cases, your rental application may be denied outright.
3. Your ability to refinance
If you’re a homeowner, you probably check on interest rates every once in a while. After all, when rates plummet, you could save by refinancing your home.
And, just as when you got your first mortgage, your credit score matters. It helps determine what interest rate you’re offered, what types of mortgages are available to you and even which lenders are willing to work with you. And when your credit is great, mortgage companies will compete for your business with their best deals.
But what if you have poor credit? You likely won’t secure the best rates, terms and conditions on a loan. Or you might need to wait until your credit improves before you can consider refinancing.
4. Your job prospects
When you’re interviewing for your next job, don’t be surprised if your potential employer asks for your permission to run a credit check. While the company won’t get a look at your exact credit score, it can receive a fairly detailed credit report. Depending on the type of business, the employer may use that information to draw conclusions about whether…
- Your financial instability could make you more likely to steal from or defraud the company.
- Your failure to live up to payment agreements with creditors translates to a lack of responsibility on the job.
- Your own poor financial decisions disqualify you from handling customer’s money (if you’re looking to work in banking, insurance or another area of the financial sector).
5. Your personal relationships
Surprised by this one? How could your credit score of all things affect your ability to get a date or sustain a relationship with that special someone?
The U.S. Federal Reserve conducted a survey with a fascinating finding: having bad credit or a score that’s drastically different from your partner’s could forecast trouble in paradise. The reasoning? Credit problems can be a source of major relationship stress. But when you and your beloved are well-matched in your approaches to finances, you’ve conquered a big area of compatibility.
So what can you do?
If you’re faced with the repercussions of bad credit, you can turn things around by getting serious about polishing up your credit history:
- Keep your expenses well below your income, so you’re not tempted to treat credit as a salary.
- Commit to making every single bill payment on time.
- Keep your credit utilization ratio low by using as little of your available credit as possible.
- Check your free credit reports and credit score frequently so you can track your progress.
It’s true: a bad credit score can haunt you in some unexpected areas of your life. But, a great score can set you apart from the crowd and potentially get you access to better rates and opportunities. If your credit could stand an upgrade, start working on it today and reap the extensive benefits of better credit.