Society is becoming increasingly dependent on using credit to make purchases and decisions. These days, good credit is used for more than just getting a credit card or a loan. More and more businesses are making the case that you must have good credit before they extend products or services to you.
It Affects Where You Live and How Much You Pay
Before you can buy a house, mortgage lenders want to know that you won’t default on your mortgage.
If you don’t have good credit, the lender will consider it risky to give you a mortgage loan. If you’re approved for a mortgage your credit affects your interest rate which directly impacts your monthly mortgage payment. Bad credit could mean a higher mortgage payment. Worse than that, your mortgage application could be turned down because of your bad credit.
Don’t think that because you’re not looking to buy a house right now that your credit isn’t important. Landlords also use your credit to decide whether to rent to you. Landlords consider your lease as a loan. You’re being loaned a place to live and the landlord wants to know you’ll pay back this loan. If you don’t have good credit, you can get denied for an apartment.
It Affects What You Drive and Your Car Payment
Unless you have the cash to purchase a car, you’ll have to get a loan. Your credit not only affects whether or not you qualify for a loan, but also the amount and interest rate of the loan.
Generally, loan applicants with good credit qualify for larger loan amounts with lower interest rates.
Bad Credit limits you options. Fewer lenders will work with you if you have bad credit and those that do will charge a much higher interest rate on your auto loan. A higher interest rate means a higher car note to pay each month.
It Can Affect Your Job Search
Many employers conduct credit checks as a part of the hiring process. (Note that employers check credit reports not credit scores.) If you haven’t demonstrated financial responsibility, a prospective employer might be hesitant to hire you. For example, the employer might believe your level of debt is too high for the salary offered.
Some employers also check credit scores before giving a promotion or raise, especially for financial-related or executive positions.
It Affects Your Ability to Start a Business
Many people have dreams of starting their own business. Most business startups require a sizable amount of cash that you might not have available. In that case, you’ll need to obtain a small business loan. Among other things, you need to have good credit to qualify for the business loan.
It Affects Other Monthly Bills
It might be somewhat shocking to learn that your credit is needed to establish utility service. Your electric company contends that you’re borrowing one month of electric service.
So, before turning on your electricity, the company will check to see if you have good credit. This applies to most utility services including cable, telephone, water, and even cell phone.
Since your credit is defined by how you’ve paid (or not paid) your bills in the past, many businesses – landlords, mortgage lenders, utility providers, and even employers – use your credit to predict your future financial responsibility. Anytime you need to borrow money, or even services, your credit is called into question. This is why maintaining good credit is so important.