The Many Ways Your Credit Is Used to Judge You
Bad credit can sometimes feel like an embarrassing photograph from high school. You remember those, right? Bad credit has the ability to come back and haunt you again and again throughout the years, often when you least expect it, judging you over and over again.
Applications for Financing
Let’s begin with the obvious. You probably will not be shocked to read that the condition of your credit will be an important factor whenever you apply for a credit card, loan, or other types of financing. Good credit typically means good rates and terms, assuming you can satisfy the rest of the lender’s approval criteria. However, bad credit may lead to higher rates or a denial for financing you need.
Insurance Coverage
People are often surprised to learn that credit is routinely checked by insurance companies whenever you apply for new home or auto coverage. The state of your credit is likely to influence both your ability to qualify, and the premium which you are charged if your application for coverage is approved. Better credit means better premiums.
That Roof Over Your Head
It has already been mentioned that your credit matters whenever you apply for financing, such as a mortgage. But even if you are renting a home or apartment your credit is likely to play an important role in your ability to secure housing. If your credit is in good shape your rental application will likely pass with flying colors, probably with minimal deposits and the best available terms the landlord or leasing agency offers. If your credit is in not-so-great-shape then the opposite may be true.
Employment Applications
Your credit scores are not be checked as part of an employment screening (that is a myth), but your credit reports are fair game with your permission in most states and for most positions. Employers often have policies, especially within the financial sector, to not hire applicants with certain types of credit issues on their reports. Additionally, even if your credit problems do not disqualify you from employment consideration, they may still make you a less attractive applicant when compared with someone else who has equal qualifications but a blemish-free credit report.
Security Clearance
If the job you hold or wish to hold requires a security clearance then credit problems could potentially signify a major hurdle. The federal Guidelines for Determining Eligibility for Access to Classified Information states that “An individual who is financially overextended is at risk of having to engage in illegal acts to generate funds.” As a result, a history of not meeting financial obligations may raise concern and may disqualify an individual from eligibility for security clearance. Point being, it’s easier to hire the person with good credit.
Bonds
Are you a business owner? Does your state require a bond to operate in your industry? If so then your creditworthiness may be a significant factor in your ability to become bonded. When major credit issues appear on your credit reports (defaults, public records, past due accounts, etc.) your application for a bond could be denied or you might be required to pay a much higher rate.
Utility Accounts
You may have never considered it before, but utility companies are extending you a form of credit whenever you access their services. Typically, you receive the service first (i.e. electricity, water, gas, etc.) and pay for it later. Although you generally cannot legally be denied these services due to credit problems, it is common for utility companies to require higher deposits from new customers due to poor credit.
Mobile Phones
Want to take advantage of the tempting new mobile phone promotion you saw on TV? Your credit rating is very likely to be considered. If you have good credit you may qualify for a mobile phone provider’s best terms and most appealing offers. However, if your credit is in poor health then you may be charged a large deposit or even see your application for service denied.