If you’ve ever tried to get a credit card, a car loan, or a mortgage, you know the importance of having a healthy FICO score. The score is determined by assessing your bill-paying history, the types of accounts you already hold, if you have any accounts in collections, the age of any current accounts, your outstanding debt, and the number of credit accounts you currently have. This score impacts the amount of credit a lender is willing to extend to you as well as the interest rate that will be attached to the loan. Pulling your credit report is the only way lenders are able to assess whether or not you’ll be a good credit risk.
Other Businesses That Will Look at Your Credit
Banks aren’t the only institutions checking on your credit score. It has become a more acceptable practice for businesses other than banks to run your credit to decide whether or not they will work with you. More and more insurance companies are beginning to check an applicant’s credit report before issuing them a policy. The thought behind this practice is that those with poor credit may be more likely to file a claim than those with a healthy score. They can also use your credit rating to determine the terms of your policy, granting you a lower premium if you boast a higher credit score.
The insurance industry isn’t the only business to start pulling their customers’ credit reports; cellular service companies, cable companies, and utility companies are also using credit reports to decide what terms to offer their customers. While these companies aren’t likely to deny you service if your score is less than perfect, you may be required to put down a hefty deposit or be required to obtain a co-signer on the account before they accept your business. By requiring a deposit, or co-signer, these businesses are ensuring they won’t lose out if you’re not a good credit risk.
Poor Credit Could Cost You a Job
While you may think it’s unfair to base an employment decision on your credit score, it is something that’s happening more and more frequently. If you’ve recently applied for a job, you may have been subjected to a background check. These days, many companies include a credit check along with the background check. This has become an important part of the hiring process. Employers believe that applicants with low scores may be more tempted to steal or embezzle money from the company. They also look at the credit reports as a way to determine whether or not a potential employee will be reliable. An individual with a poor credit score is considered a potential risk.
Don’t Lose Hope
If your credit score is less than stellar, it isn’t the end of the world. There are ways in which you can improve your score and increase your chances of getting a credit card, mortgage, better rate on your insurance, or even the job you’ve always wanted. A significant factor in determining your score is whether or not you are paying your bills on time. Keeping to your payment schedules will help raise your score. You also need to keep your balances well below the minimum; having your debt close to its credit limit has a negative impact on the score reported to the credit bureaus. Avoid opening new lines of credit. To keep an eye on your credit, and ensure you’ve got things in check, be sure to request your free annual credit report from the credit bureaus. Having good credit doesn’t just affect your ability to get a loan; it can impact every aspect of your life.