After your Social Security number, the most important number in your life is your credit score. You probably know that lenders look at your credit when deciding whether or not to issue you a credit card or loan, but your credit score plays a much more significant role in your life.
7 ways your credit score impacts you
If you have poor credit, it’s important to take steps to improve your credit score as soon as possible. Your score affects you in many different ways, including:
1. Securing an apartment
When you are apartment hunting and you submit an application for a lease, the landlord or property manager will likely run both a background check and a credit check. If you have poor credit, you might not be able to get approved for an apartment on your own. Instead, you might have to ask a friend or relative with good credit to act as a cosigner on the lease, meaning they’re responsible for making the rental payments if you fall behind.
2. Getting a new phone
If you have your heart set on the latest smartphone, your bad credit could cost you. Cell phone companies regularly look at credit scores when reviewing your request for a new phone, especially if you plan on making installment payments rather than paying cash. If your credit is less-than-stellar, you could pay a higher rate, or you could be denied entirely.
3. Taking out a loan
Your credit score plays a huge role in your ability to qualify for lines of credit, such as for a mortgage or a car loan. If your credit is poor, you could be denied, or you could qualify for a loan but pay a much higher interest rate. Although you may be able to get the loan you want, you’ll likely pay a premium for it.
For example, if you planned on buying a $10,000 car and had excellent credit, you could qualify for a loan with an interest rate as low as 4.00%. If you had a five-year loan term, you’d repay a total of $11,050 by the end of the loan, meaning you would spend only $1,050 in interest charges.
By contrast, if you had poor credit, you might get stuck with an interest rate as high as 29.00%. If you took out $10,000 and repaid that loan over the course of five years, you’d pay a total of $19,045. Your poor credit score and the resulting high-interest loan costs you nearly $8,000 in interest fees.
4. Searching for a new job
If you’re looking for a job, it’s smart to work on improving your credit score. According to the Society for Human Resources Management, approximately 47 percent of employers perform credit checks on job applicants. Companies look for good credit histories because they believe applicants with high credit scores are less likely to steal or embezzle money, and it minimizes their legal liability.
5. Setting up utilities
When you move and need to set up water, electric, and cable in your new home, the utility companies run a credit check. If your credit isn’t great, you might have to pay an extra fee to get utilities turned on. Depending on where you live and your credit score, the connection fee can cost hundreds.
6. Buying a home
If you dream of becoming a homeowner, poor credit can cost you. A low credit score can limit your chances of getting a mortgage at all. Or, if you do find a lender willing to work with you, you could be charged a much higher interest rate. Over the course of your mortgage, that increased rate can add thousands to the cost of your home.
7. Applying for a credit card
If you’re looking for a new credit card, a poor credit score can limit your options. Instead of valuable rewards card, you might be only able to get a credit card specifically designed for people with bad credit. These cards tend to have lower credit lines and higher interest rates than other cards, which can be risky and expensive if you run up a balance.
Improving your credit
Your credit score is one of the most significant numbers in your life, affecting a number of areas of your life. If your credit isn’t perfect, focus on improving your score to qualify for lower-interest loans and save money.
Don’t know where to start? Get your free credit score today.
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