Good credit is important, we all know that. But how important is it? What real impact does it have on your life? Well, here you go:
#5 – Your job… or lack thereof.
You may not know it but many employers both big and small are now pulling credit before they hire you. Credit is important because it does demonstrate a person’s character. Like it or not, part of your character is how well you fulfill your obligations and pay your debts. There is a possibility that your credit can be the difference between you and your competition for a job. Times are changing.
#4 – Your insurance
Most insurance companies now use credit score to help determine your premium amount. Most insurance companies also have what they call high risk offerings and credit can often be one of the single most important aspects of whether you are considered high risk or not. Placing you in a high risk, poor credit, insurance situation means you will flat out pay more for your insurance. A lot more in many cases. A standard auto insurance premium might be increased by 25-35% with bad credit customers.
#3 – Renting a home or apartment
Today’s rental market is very competitive and landlords and management companies can now afford to be more picky about who they rent to. Given that a bad credit score is an indication of your general ability or willingness to pay your bills, these companies have a right to choose what they consider to be more responsible, lower risk renters. It seems unfair to those with credit issues, but it makes sense from a risk assessment on the part of a management company. It may be very hard to find an apartment in a decent area if you have poor credit.
#2 – Buying or leasing a car
In terms of leasing, you may be outright rejected for a lease if you have bad credit. It’s very likely that leasing will not even be an option for you at all. In terms of buying a car, many car dealers (used or new) have poor credit lenders that will offer you a loan but at a serious price. Not only will you likely be required to put a hefty amount down but you will likely pay rates as much as 10 times the good credit buyer. There’s a huge difference in payment with a 20% vs. a 2% car loan. It can literally be thousands of dollars more you will spend on the overall cost of the vehicle.
#1 – Buying a home
Today’s home lending market is pretty rigid. Since the basic collapse of the housing market and devastating impact of the mortgage lending crisis, banks and underwriters are no longer willing to turn the other cheek when it comes to bad credit. Most of the time, this simply means you will not be able to buy a home. Other times, you may be able to but it will cost you more through a higher interest rate. Even a slightly higher rate can make such a difference in a monthly mortgage payment that it will take the borrower completely out of getting approved because of the impact on the monthly budget.
Take your credit seriously. These are the 5 big ways that credit impacts your life. There are many other small ways that add up to higher living costs and lower self esteem.