If it’s been a while since your last credit check or you’ve never kept track of what your score is, you may be wondering what your credit score is used for and why it matters. While credit scores are essentially a numerical way to analyze and express your history of handling credit, they can be used in a number of ways by lenders, individuals and others to determine your creditworthiness and even trustworthiness, and so can have a major impact on your life in several unexpected ways. While you may know general facts like how the higher your score is, the better, there are a few interesting facts about your credit score you might not have known about that demonstrate its importance for your overall financial well being.
1. It Affects Which Credit Cards You Can Get
If you’ve ever filled out an application for a credit card, you may be interested to know that your previous credit cards could impact whether you get approved for the one you’re currently applying for. This is because credit card companies usually check your credit score to help them assess your creditworthiness and decide what kind of account you qualify for. Factors like your credit limit, your interest rate, and the type of card, rewards and incentives you’re offered could all be affected. If you have previously poor credit, it could even result in your application for a new card getting rejected, since the company will view you as too much of a financial risk.
2. It May Affect Employers’ Hiring Decisions
When you apply for a new job, you may expect to submit information like your work history, educational background and professional references. However, it may interest you to know that credit checks are another factor that employers sometimes use to determine which candidate to hire. In some industries, like the financial sector, this is more common than in others. Employers may conduct credit checks as part of background checks in contingent employment offers, and if you have a poor score, this could affect their decision to hire you.
3. It Could Be Checked By Utility Companies
Perhaps surprisingly, utility companies sometimes check your credit score when you sign up with them. This may be because in a way, you’re borrowing their services when you become their customer. Utilities can include things like water services, gas, electricity and even satellite or cable TV, so poor credit could impact your ability to access a multiplicity of services you may currently take for granted.
4. It Could Affect Getting a Mortgage
If you’re thinking about purchasing a home soon and you’ll need a mortgage in order to afford the house, you should be aware that your credit score will play a significant role in the mortgage company’s decisions. Better credit history could mean getting approved for a larger loan amount, lower interest rates or shorter term periods. On the other hand, poor credit history could make it difficult to secure a mortgage in the first place.
5. It Could Impact Loans
If you need other types of loans, such as student loans, car loans or loans to cover medical expenses, for instance, low or bad credit could make it difficult to get approved for the amount you need, or even to get approved at all. By using borrowed money responsibly now, you prove to potential lenders that you can handle borrowed money well in the future.
6. It Could Affect Your Phone Plan
Finally, you may be surprised to learn that bad credit could even affect the type of phone plan you’re able to get. While customers with good credit can often get mobile deals advertised on TV, for instance, customers with bad credit may be relegated to more expensive pay-as-you-go plans.
While you may have already know that your credit score is a three-digit number used to evaluate how well you handle credit and that higher scores are generally better, credit scores can impact your financial life in a number of surprising ways you might not have known about. If it’s been a while since you last looked at your credit report or checked your score, you may want to look over your history and work towards improving your score. It could potentially make a big difference in your financial future.