3 Surprising Ways Your Credit Score Could be Costing You

The recent recession has given rise to a backlash against credit. And it is true that an irresponsible use of credit, especially credit cards, can lead to financial ruin. For some, it might make sense to do away with the temptation and have done with credit altogether. It’s a nice thought, but if you aren’t maintaining your credit score, you might find yourself paying for it in unexpected ways.

 

You already know that your credit score is a Big Deal when it comes to how lenders view you. Your credit score has to pass muster in order for you to get a loan to begin with. Then, your credit score is what lenders use to determine the interest rate you pay. The lower your credit score, the higher the interest rate — and the more money you pay over the life of the loan. Many figure that they can save up enough cash to buy most things (except a home), and that once they have a home, there is no need to worry about a good credit score. Unfortunately, this isn’t true. Here are 3 non-lending ways your credit score could be costing you:

1. Insurance Premiums

Many insurance companies now pull your credit score in order to help determine your premium. Credit scores are used to help determine the likelihood that you will put in a claim. For auto insurance companies, there is an increasingly assumed correlation between how responsible you are with your finances and how responsible you are likely to be on the road. While your credit score isn’t everything for setting an insurance premium, it is becoming a prominent factor. I save $15.00 a month on my insurance because I have a good credit score. While it doesn’t seem like much, if you consider the savings over the several years that I will be paying premiums, it really starts to add up.

2. Employment

If you have a poor credit history, especially if you are applying for a sensitive job, employers may worry that you could be susceptible to the temptations of taking bribes and embezzlement. Even though employers aren’t supposed to look at your score, they can get a pretty good idea of what your score might be by looking at your credit report. My brother-in-law was rejected for a job as a security guard because of his poor credit history. Even if you aren’t in a particularly sensitive position, employers may be concerned that showing an irresponsible bent with your finances could translate into poor work habits. An employer can’t just pull your credit report without your authorization, though. However, if you are unwilling to allow a credit check, an employer may decide you aren’t worth the risk.

3. Landlords

If you are looking to rent, you might be rejected on the basis of your credit. Landlords like tenants who pay on time, in full, and don’t make trouble. Your credit history might indicate that you have trouble paying on time, and could signal potential problems. Many landlords who rent to those with lower credit scores require larger up front security deposits, or may insist on first and last month’s rent up front. The cost of moving is expensive enough without having to add a premium due to a low credit score.

Bottom line: Your overall financial reliability is becoming increasingly connected to your credit score. Even with regard to items that are not directly related to loans, your credit history is used for decision making. This means that it is worthy of your attention, and that improving your credit score should remain a priority.

Want More FREE Finance Tips?
Like what you just read and want to get more great content from Financial Highway? Just enter your email address below and you'll automatically get Financial Highway posts sent straight to your inbox.
We hate spam just as much as you

Comments

  1. says

    I didn’t really think about landlords. All those people who are talking about walking away from their mortgages don’t realize how much it could hurt them down the road. You will have a hard time finding someone willing to rent to you if you have a foreclosure on your credit.

  2. says

    Despite its flaws, the credit scoring system in use today remains the best available yardstick to measure someone’s credit worthiness. Prepaying everything in cash is an alternative that does not make much financial sense.

  3. says

    Unfortunately, no one teaches you about your credit score in school. Yet, it has a major impact on your finances in your adult life. They tell you to save but no one tells you how a low credit score and erode your wealth.

    Fortunately, the internet and sites like yours can help people get on track with improving and maintaining their scores. How you manage your credit cards and their limits can increase your score. It all starts with a little education…

  4. says

    There has to be a drive to include family finances in school curriculum. However, even then there is no guarantee that families will have a balanced financial life. Surgeons operate while they are under the influence. Knowledge sometimes can be a handicap.

  5. says

    I agree with the other commenters, this really should be part of our education system. I even had a money management class in high school, but we never went over the basics of your credit score and how it can affect you. Its scary to think about how many people are getting financially killed by their low credit score without actually knowing how it affects them.

  6. says

    Miranda- Great insight for encouraging your readers to stay on top of their credit. Many times because we don’t visually see it every day our credit score gets pushed aside on our monthly to-do list. It would really benefit one to monitor their credit score to keep track of expected or unexpected changes. It’s kind of like car insurance, where there are years you go through without using it, but you are glad it’s there when you have to use it. Credit monitoring of all 3 Credit Reports helps you catches problems early which could save you thousands of dollars and hours of aggravation. For more information visit our site http://www.freecreditscore.com.

  7. selena says

    i’ll just keep to debit-cards, thank you very much
    it probably does help that i live in a country where debit-cards are far more prevalent then credit-cards, so many of the above don’t really apply here (your riskiness to new lenders is determined based on past missed payments on loans and other bills, rather then on ‘the level of credit you could potentially have applied for’)

  8. says

    Thanks for sharing your thoughts. I truly appreciate your efforts and I
    will be waiting for your next post thanks once again.

Trackbacks

  1. [...] at the time was more than sufficient to get the best rates. If you plan to buy a home, check your credit score, and see where you are at. You may need to pay down some debt, make on time payments and fix errors [...]

  2. [...] These are major considerations, and they can mean a difference of thousands of dollars. However, insurers, cell phone companies, and even Internet providers also use your credit score to make dec…. Your credit score is a numerical representation of your financial habits, and some even make other [...]

  3. [...] your credit situation has a great deal of influence on the rest of your financial situation. Loans cost you more when you have poor credit, and even your insurance rates and other costs can be influenced by your [...]

  4. [...] When we think of bad credit, many of us think about the ways that bad credit can harm our chances at getting a loan. Bad credit can lead to higher interest rates, which can cost more money in the long run. Part of borrowing smart is making sure that you have good credit so that you pay the lowest possible interest charges. [See: 3 Surprising Ways Your Credit Score Could be Costing You] [...]

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>