5 Surprising Ways Your Credit Score is Impacting Your Life
Your credit score (or your FICO score, to be more specific) is one of the most important numbers in your life, but its effects won’t always be obvious. From contracts to job availability, your score is already working for or against you right now, whether you know it or not.
It Helps Determine The Terms On Your Loans
Most people know that poor credit can make it harder to be approved for large loans. What you may not know is that even when you do get offered a loan, it will usually be a very unfavorable one. The lender might require a significantly larger down-payment, present you with a high-interest rate to encourage you to prioritize paying down the loan, or just give you a shorter repayment period, to begin with. Since people typically seek loans to pay for items that are very expensive in the first place, these extra restrictions can make big purchases like a car or a home unaffordable for those with a low FICO score.
It Could Cost You A Job
Many jobs that require people to handle large amounts of money, even at the entry level, will not hire someone with a low or even middling FICO score. This is because of concerns that people with a troubled financial past may be tempted to steal from the company when the opportunity presents itself. Even if the job itself doesn’t run a credit check, you may still have trouble if it requires security clearance – the government avoids granting clearance to people with low credit scores for the same reasons, although a record of steady improvement can help to persuade them to look past that.
It Can Make Or Break A Rental Agreement
A house or apartment with a tenant in it is one that can’t be rented to anyone else, so landlords needing to turn a profit on their investment need to be careful when choosing who to offer a lease. They need to know that you’ll be able to continue paying your rent, preferably on time, for the duration of that lease, and a low FICO score suggests that you might be unwilling or unable to do that. While a landlord can evict a tenant who can't make rent, it's a big hassle and it doesn’t make up for the rental income that was lost while the eviction was still in progress, so it can be very hard to convince them to take the chance.
It Affects Your Cell Phone Contracts
Almost everyone needs a cell phone nowadays, but if your credit score is poor, you might not have the same options as everyone else. Cell phone plans involve recurring monthly bills, just like a loan would, so it makes sense for providers to look for some way to judge your level of trustworthiness as well. Customers with higher credit scores are offered better rates, newer phones, and lower initial deposit requirements because companies know they can be counted on to honor any financial agreements they enter into. Those with low scores get worse deals and may even have to resort to prepaid plans.
It Can Cost You A Lot Of Money
When you have bad credit, companies sometimes need more money from you upfront to offset the risk that you’ll just default on any payments you were supposed to make after that. Utility companies might ask you for a security deposit before connecting any of your services, something they don’t necessarily ask for from customers with a better FICO score. Most insurance premiums you pay will be higher than they would be if your credit score was better, as companies see that number as an indicator of an unstable life.
This can make bad credit into a vicious cycle: the lower your score gets, the harder it becomes to raise it again, making it important to establish good money management habits as early as possible. If you've failed to establish credit, or have a low credit score due to lack of repayment, don't fret too much. All is not lost, and there are ways to repair and grow your credit history.
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