Written by: Stephanie | Best Company Editorial Team
Last Updated: October 30th, 2019
Your credit score dictates a lot more of your life than you may realize. Large purchases like homes and cars are obvious, but what about higher security deposits, cell phone contracts, and getting approved for an apartment?
For many industries, your credit score has essentially become your identity. It reflects your history, your spending patterns, and how you handle your financial obligations. A lot about you can be derived from your credit score; it tells a story of where you are in your life and the kinds of choices you make. A strong credit score indicates that you will likely pay back your debts on a timely manner and that you are dependable. A poor credit score may show that you have had some financial difficulties or have taken on too much debt.
1. A Bad Score Can Impact where You Live
Credit scores used to be something you only had to worry about when applying for a mortgage; however, renters can now expect to have their credit score checked by potential landlords. Your financial history can show how reliable you are to pay your rent, and can also show if you have any delinquencies or major debt.
2. A Bad Score Can Cost You Money
A higher credit score will save you money on interest (for credit cards, auto loans, mortgages, and personal loans), whereas having a poor credit score shows financiers that you could be a risk, therefore you pay higher interest rates. A small percentage difference on a loan can cost you hundreds to thousands of dollars quickly.
In the image below, we can see that the difference between excellent and poor credit can cost you over $5,000:
If you know you will be moving or needing to buy a car in the next six months to a year, you should check out your credit report and fix any errors. It was found by the FTC that 1 in 5 Americans have an error on their credit report. If you feel that you are a victim of an error, check out our top credit repair companies to get your credit score back on track quickly.
3. A Bad Score Can Put Your Loan Application at Risk
If you have poor credit, it is a lot more difficult to be approved for most credit cards and loans. This can put many people in a bad cycle of applying for credit or loans they need, which then in turn lowers their credit score with a hard inquiry. Avoid this vicious cycle completely by only applying for loans and credit cards that openly accept lower credit scores. Avoid applying for new credit if at all possible. New credit will shorten the average length of your credit history which will also hurt your credit score.
4. A Bad Score Can Increase Security Deposits on Utilities
When moving into a new apartment or home, you may have to pay a deposit on your utility service if you have poor credit. Utility companies will consider your credit score, and your history of paying your utility bills on time. They can charge you as much as an estimated two full months utility bills for your deposit.
But, deposits are not just for people who are moving into a new place. Many state regulations allow utility companies to require customers to pay a deposit if they are late on paying their bill three or more times. This means that whether you have lived at your home for years or are just starting out in a new place, you could end up paying a high-security deposit.
5. A Bad Score Can Affect Your Cell Phone Contract
Cellular phone companies have also started checking out your credit score to determine if they should sign you up for their contracts. If you have poor credit, you may not be accepted at all, and may have to find an alternative plan to purchase a phone. Some of these alternative options include paying a security deposit, joining a family plan, or going with a prepaid carrier. We recommend not swapping companies frequently, as the hard inquiries can negatively impact your credit score.
6. A Bad Score Can Limit Your Job Options
It may seem hard to believe, but your credit score can limit your career choices. Jobs that require any security clearance. This includes some military jobs, IT professionals, and some government positions. You also could not be a financial broker, or a mortgage officer. It is not your score that is considered, but your history of being financially responsible. It is important that your credit history shows that you are trustworthy and reliable.