When it comes to improving your overall financial health, there are a variety of very important factors that should be taken into consideration. While income, assets, and liabilities are very important to understand, your credit score is also extremely important. Your credit score is very important as it can impact your life many different ways, several of which many people are unaware of.
Loan Approval and Costs
One of the most significant ways that your credit score will impact your life is by altering your chances of loan approval and what the ultimate costs will be. If you have fallen behind on loan payments in the past and your credit score is lower than you would like, it could be hard to qualify for a good loan. Furthermore, when lending money to people for mortgages, student loans, and credit cards, lenders will typically offer lower interest rates to people that have a good credit history. Younger people such as college students are more susceptible to higher interest on things like student loans due to their lack of credit history. This is why it’s important to establish credit early.
When you are looking for a job, you will likely find that many employers will want to complete a background check on their applicants. Part of this process will include completing a review of your personal credit history. If you have a good credit score, you will likely not have to worry about how it will impact your chances of employment. However, if you have a poor credit score, some employers may think twice about hiring you. This is especially true if you are applying for a job that will involve handling money.
Another way that your life can be affected by your credit score is by how it can impact your insurance rates. Auto and other insurance providers will take a lot of steps to try and figure out what type of insurance risk you are. Insurance companies have found a correlation between credit score and insurance risk and now perceive people with lower scores to be greater insurance risks. Because of this, you may have a harder time being approved for insurance. Even if you are approved, you will likely be charged higher rates than someone that is less of a credit risk.
Most people are aware that mortgage lenders will take a look at credit scores when they are running loan applications. However, landlords will also pull credit reports when they are looking at a lease application. If you are looking for an apartment or other rental property and you have a bad credit score, you could end up losing the unit in favor of someone that is less of a credit risk. If you are approved and lease the unit, you may have to get a co-signor or post an additional reserve with the landlord.
If you try to purchase a cell phone, cable package, or Internet plan, the company may pull your credit report. If you do not have a good credit report, the company may still offer you service, but they could require you to put forth a deposit in the meantime. Furthermore, getting this deposit back can be a challenge after you end your service agreement.