Importance of Credit Scores
Have You Checked Your Credit Report Lately?
The word credit can be heard every day from the TV, ads in the paper, and even the radio.
What is credit? It is the ability to borrow based on the promise of repayment. Lately, everything seems to be based on a person’s credit score. Here are a few ways credit scores affect the price you pay for the following items:
- Personal Life insurance: Having a bad credit score can drop you to the lower tiers causing you to pay a higher premium, though your health is still the most influential factor.
- Auto and Home insurance: Poor credit can mean you are denied insurance completely or you will pay more. Before obtaining insurance from a company, ask them, “What percent of the premium will my credit score account for?”
- Employment: The trend is growing for companies to pull a credit report along with a background check. They want a stable employee. They are not allowed to ask you why you have a bad score, but you are allowed to tell them. Be prepared to discuss it. Employers can pull credit to promote or transfer an employee as well. Be open and willing to explain what happened.
- Housing: Property management companies will likely pull your credit report to determine approval or denial, though many do not take into account any medical collections. The larger the company the stricter they typically are. Small locally owned companies tend to get to know the individual.
- Loans: The higher the score, the better the interest rates you pay for standard bank loans (auto, home, signature). If your score is too low (mid to low 500s), you may be denied a loan completely or receive an interest rate in the high teens to twenties.
Check your credit report every year at www.annualcreditreport.com to check for fraud or misreporting. While 8 in 10 credit reports contain some sort of error, one in four contain such an error significant to cause you to be denied credit in spite of any other positive information.
As you can see, building and maintaining a good credit score can positively affect a major part of your life.
If you have any questions, would like to discuss your financial challenges, or are just looking for advice, please contact us at your convenience. As always, we are here to help and look forward to hearing from you.
1-877-OUT-DEBT (688-3328)
Debt Reduction Services and the National Financial Education Center
Financial Educator, Facilitator, Lecturer, Speaker
A Certified Personal Financial Counselor, Todd Christensen, M.A. is Director of Education for the non-profit National Financial Education Center at Debt Reduction Services Inc, served as President of the Idaho Financial Literacy Coalition from 2006 until 2009, and was asked in 2009 to serve on the Council for Certification of the American Association of Family and Consumer Sciences.
Credit card is one of the first things a lender looks at when you apply for credit. Credit scores help lenders determine how financially responsible you are, as well as whether or not you are likely to default on a loan. Whether you apply for a credit card, mortgage or car loan, your credit score will determine whether you get approved, as well as at what interest rate and loan amount. The higher your credit score, the better.