Why Your Credit Score Matters
You may be surprised to learn some of the ways your credit score can affect your life. Many of us naively believe the only time our credit score matters is when we apply for credit to buy a house, make a purchase, or apply for a new credit card.
However, having a solid credit history can affect consumers in a surprising number of ways. Credit histories influence everything from renting an apartment and getting a mortgage to applying for a job or qualifying for a lower rate on auto or home insurance, according to the Insurance Information Institute (I.I.I.).
"The importance of good money management can’t be stressed enough," says Jeanne Salvatore, senior vice president and consumer spokesperson for the I.I.I.
"Building and maintaining a solid credit history is one of the most crucial things you can do to ensure your financial well-being."
Your credit score can work for you or against you in the following situations:
- Applying for a Job
Potential employers routinely check credit histories as part of the hiring process. A person with good credit might appear to be more responsible and less likely to be distracted by financial worries. In addition, a good credit record is viewed as a measure of maturity and stability.
- Renting an Apartment
Landlords often look at applicants’ credit records before renting apartments to see whether they manage their finances responsibly and are therefore likely to pay their rent on time. Those with good credit histories can often avoid large security deposits when the lease is signed.
- Starting a Business
If you’re planning to start your own business, you will be better able to qualify for trade and credit lines from suppliers if you have good credit.
- Signing up for Utilities
Telephone, cable, electric and gas companies will waive cash deposits for those with a solid, established credit history.
- Securing Loans and Mortgages
Banks and other lenders look closely at credit records. By analyzing the financial resources and debt-paying history of applicants, lenders can determine whether they are likely to reliably repay the loan or mortgage. Those with better credit are likely to get lower interest rates as well.
- Purchasing Auto and Homeowners Insurance
Most insurers use credit-based insurance scores when reviewing new applications for auto and homeowners insurance. All things being equal, a person with a good insurance score will pay less for insurance than someone with a poor score. Actuarial studies show that how a person manages his or her financial affairs, which is what an insurance score indicates, is a good predictor of insurance claims.
Article reprinted courtesy of the Insurance Information Institute.
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