There are times when you know with absolute certainty that your credit score matters. A mortgage lender isn’t going to give hundreds of thousands of dollars to someone who doesn’t pay his bills on time. And although bad credit won’t stop a car loan, a low score has its consequences, such as a higher auto loan rate.
I say all this to say one thing: credit and financing go hand-in-hand. Most people do whatever it takes credit-wise to ensure they’re approved for a loan, but others downplay the benefits of good credit. They make it known that they don’t have the best credit because of so-and-so reasons. Some don’t care about their low score, nor do they make attempts to build their score. In their minds, credit doesn’t matter, especially since they’re able to get the things they need, such as car loans — although they pay higher rates — and because they have a roof over their head, although they rent and can’t qualify for a mortgage.
To each his own. But if you speak with these people, they might have you convinced that credit doesn’t matter. Maybe it doesn’t to a degree. Some people have the resources to pay cash for everything. However, even if you don’t have plans to buy a house or car anytime soon, you need to pay attention to your credit score. The truth of the matter is your credit matters more than you think.
Do you know what’s in your credit report and what your credit score is today? There are many legitimate and free credit report tools available that do not require your credit card information. You can access your credit report directly through AnnualCreditReport.com. To get a free credit score you can pay for access or determine if your financial institution or credit card company offers them to customers. Additionally, you can get free credit scores using apps like
Want to discover free credit report monitoring services and scores? Find the right app for you in the financial marketplace.
Now, here are four times when you don’t think credit matters, but it does.
1. Credit Matters When Renting an Apartment
Some people rent homes and apartments because they can’t qualify for a mortgage loan, and since renting is the only option for people who can’t get a mortgage and purchase their own house, you may believe landlords don’t care about our credit history. I’m here to tell you differently. Although it’s true that some landlords don’t put much emphasis on good credit, other landlords do pull credit reports and check credit scores. They’re looking for good credit applicants and they won’t approve your application if you have a history of bad credit.
While helping someone look for a new apartment, I discovered that credit carries more weight in the rental world than many people realize. To be fair, it all depends on the type of apartment you want. If you’re looking for a basic apartment, something that’s cheap and affordable, you might get your foot in the door despite not having the best credit score. But when you start looking at nicer places, such as luxury apartment homes, the credit standards become tougher. You don’t need perfect credit for some of these apartments, but if your score falls beneath a certain number, (which was 650 for many of the apartments we looked that) you won’t get approved.
With regard to the luxury apartments that did allow all credit types, the security deposit was based on the applicant’s credit. For example, applicants with a 700 or 800 credit score only needed a $200 security deposit, but those with much lower scores paid more — up to one month’s full rent as security.
2. Getting Cable Service (or Other Services)
It seems like more and more people are ditching their cable to save money with streaming services like Netflix and Hulu. But if you’re still attached to the cord and thinking about ordering new services, your credit history plays a role in how much you spend out of pocket. Credit matters when it comes to securing utilities. Cable and utility companies don’t always tell you this, but once a rep gets your information like your name and Social Security number, they’re going to run a credit check.
Most utility providers charge a service fee that’s standard for all customers. But if you have a low credit score, or if you skipped out on another cable provider without paying the bill (and this information appears on your credit report), you’re also required to pay a security deposit which can be $100 or more. Security deposits are also common if you apply for a cellphone or other utilities with bad credit — telephone, electricity, or gas.
3. When Applying for Auto Insurance, Credit Matters
Maybe you’ve heard this before, but if not, you might be surprised to learn that auto insurance providers typically charge more if you have bad credit. It doesn’t seem right or fair, especially since we’re not financing insurance. But if you have a history of paying other bills late, insurance carriers realize there’s a greater risk that you’ll not pay your insurance premiums, or at the very least not pay on time.
4. Getting a Job Offer
Credit matters with some employers. I can understand why some employers run credit checks on prospective job applicants, and why they might prefer people with a good credit history. If the job involves working with the company’s finances, it only makes sense to choose someone who successfully manages his own money and debt. But at the same time, this means that many responsible people can potentially fall through the cracks.
It might seem like a contradiction, but not everyone who has bad credit is irresponsible with their money and credit. Rather, due to situations beyond their control, perhaps a job loss and an inability to find another job quickly enough, they had no choice but to pay bills late. This doesn’t mean they’re terrible people. They just stumbled upon hard times. Unfortunately, some employers only look at what’s in the credit reports and not the entire picture. And if you have late payments, high debts, bankruptcy, or any other negative item on your credit report, this can determine whether you’re able to work in some industries, such as finance or with the state or local government.
Some people downplay the importance of good credit because they don’t know how to change the situation. Bad credit doesn’t have to be permanent. In fact, with smarter financial habits you can drastically improve your credit within 12 to 24 months. However, it takes a plan and consistency. Pay your bills on time every month, don’t take on more debt than you can afford, and watch your credit score like a hawk for errors or mistakes. This is your credit, and if you don’t protect it, no one will.
If you’re looking to strengthen your credit score, consider the following:
- Using a free credit report monitoring service for alerts and changes to your report
- Financial services companies, like
Tally, can help you manage debt and offer ways to consolidate your credit cards without closing them
- Another service offered by
Selfoffers people credit builder accounts to help you establish or improve your score while saving money.