10 Reasons A Good Credit Score Can Change Your Life
Updated February 24, 2018
Your credit score is a number that seems to rule your life, but why is it so important? Aside from taking out a loan or getting approved for a credit card, the effects of your credit history aren't always visible from day to day life. While it is possible to live without taking out a credit card or loan, not having any credit history to show can change and slow down some very important milestones in your life.
Here are The Credit Review's top ten reasons for maintaining a positive credit history:
1. Renting A House Or Apartment Will Be Much Easier
When you are looking to rent an apartment or house, landlords check your credit history to review your payment history and make sure you don’t have a history of late payments, delinquencies, and bankruptcies.
In many cases, landlords and management prefer to rent to consumers with a higher credit score if they are housed in a "desirable" neighborhood.
If you have bad or no credit, it'll be much harder to find a home without having to put down a hefty deposit.
Beyond being approved for your application, your credit score lets your landlord know if you need to put down a security deposit (depending on what state you reside in) or have a cosigner. If you have no credit or bad credit, this deposit can run up to hundreds of dollars and you may be required to pay a month’s rent in advance. If you have no credit or limited credit, you can ask a previous landlord or manager to write a letter of reference to lower your deposit.
Be careful not to apply at too many places, since every time a potential landlord or property manager checks your credit history, it places an inquiry on your credit report. However, this does depend on the credit scoring model, so multiple inquiries may be counted as just one.
If you fail to pay your rent and you are evicted, a landlord or property manager may send unpaid bills to a debt collector, which damages your credit scores and remains on your credit report for up to 7 years.
2. Your Mortgage Payments Will Be Lower
Along those same lines, homeowners with excellent credit (over 740) are usually the ones that receive the desired low interest rates on home mortgages.
3. You Receive A Lower Down Payment When You Buy A Cell Phone
A smartphone is an important part of modern everyday life and if you are unable to afford it upfront, some retailers allow you to pay back the cost with small monthly payments. This requires a credit check and if you have a low score, you'll be required to pay a down payment.
In the case you have bad or no credit, you can choose a pre-paid phone or family plan, but even these can result in a credit check since you can run up charges for extra data usage. If the carrier allows it, you may also have the option of putting a security deposit for a contract. The good news is, you may be able to get it back after a couple of years of on time payments.
Some companies also look at your credit history and payments before deciding if they will give you a plan. This hard inquiry can lower your credit score by a couple of points.
4. Your Initial Utility Bills Are Lower
Before providing any services, utility companies perform a credit check on consumers to ensure they are reliable. If you have a lower score, you may have to pay a deposit that equals a few months of service. Electricity and water are similar to loans because you pay for them after the services, and not paying for these services on time can result in a hit to your credit score.
If you don’t have any credit history, you may already have what is called a Utility Score, a type of credit score used by utility companies. If you are new to paying utilities, you can open a new account with a co-signer (like a friend or roommate) which lessens your chance of having to pay a deposit.
5. Your Insurance Plans Depend On It
Your credit history is important to insurance companies because they want to be sure you will pay on time. Consumers with lower credit scores are statistically more likely to file claims against the company and have lower income and savings.
If you have low credit or no credit, you'll have a harder time being approved and you may end up paying higher rates for auto, homeowners, and renters insurance.
6. Getting Hired For A Job
Many employers, especially those in the financial, security, and high risk businesses, check your credit score to screen potential employees in regards to reliability and responsibility. Although these practices are outlawed in a few states like Connecticut and Illinois, 1 in 7 applicants were turned away from a job because of poor credit. Having low credit can be viewed by employers as a sign of a potential employee not being able to perform their job correctly.
7. Loans Are Easier To Take Out
The higher your credit score, the easier it will be to take out personal loans, auto loans or a mortgage. You'll ultimately qualify to borrow from a wider range of lenders.
8. And Your Interest Rate Is Much Lower On Loans
If you have a good or excellent credit score, you will pay much less on interest rates.
A low credit score results in higher rates for any kind of loans you take out and you may find it difficult to be approved by lenders.
Be wary of making multiple inquiries, since this lowers your credit score by a few points. However, in some credit score models, multiple inquiries in a single time frame only count as one inquiry. Even if you are approved, you may find yourself with high interest rates or restrictive terms.
9. You Qualify For Better Credit Cards
The type of credit cards you qualify for is highly dependent on your credit score and the issuer. Credit cards that have rewards generally require a higher credit score, but entry level cards and secured credit cards (which require a deposit) are available for customers with no to low credit. Be sure not to apply for too many cards at once, since these hard inquiries lower your credit score.
10. Your Relationships Are Impacted By Your Credit Score
If you and your partner are looking to take out a homeowner’s loan or auto loan, lenders check both credit histories to see if you qualify or if you are able to afford large investments like a home or car. If one of you has a great credit score and the other has a low score, you'll still have a higher down payment or interest rate.
Additionally, if you share a joint credit card and you miss a payment, both of your credit scores suffer.
I Need To Improve My Score. Where Do I Go From Here?
If you have no credit history or a low credit score, here are some useful tips to improve your situation:
- Check your credit score: The first step in improving your situation is knowing where you stand. You can use these credit monitoring services to check your credit score and get automated protection from identity theft.
- Build your credit: If you have no credit history, you can start building it by applying for a credit card. Pay it off on time, keep a low monthly balance, and use less than 30% of your credit line.
- Repair your credit: Any discrepancies in your credit history can be disputed. Our top recommendations for credit repair services have a long history of helping consumers improve their credit.
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Need professional help repairing your credit report? Our experts have reviewed and ranked the top credit repair services of 2018, rating each based on reputation, BBB grades and overall results.
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