How Does a Credit Score Affect an Individual’s Life?

Credit scores determine the likelihood that borrowers will pay off debts in a timely fashion. Credit scores usually range from 350 to 850, where a higher score means that a consumer is more likely to pay bills on time and be creditworthy.

Banks and credit unions use credit scores to determine whether they want to extend a loan to someone and what the interest rate will be. Credit scores aren’t only useful in determining someone’s ability to pay their bills.

Credit scores can have a great effect on an individual. Keep reading to find out how.

1. Buying a House

A credit score is used to determine the ability to get a home mortgage.

Buyers usually need a credit score of 500 or higher to buy a home with a 10% down payment. If their score is 620 or higher, they can usually have a lower down payment, and if their credit score is 760 or higher, they will qualify for the lowest interest rates available.

Many people want to purchase a home sometime in their life, and because mortgage companies care about your credit score, maintaining a high score is essential.

2. Gaining and Maintaining Employment

Employers want to know that their employees have sound financial skills. They cannot view an employee’s credit score without their written consent, but they can see a potential employee’s credit report.

A credit report shows how well you have paid bills on time and paid off loans in full. It does not, however, show a person’s birth date or social security number, since an employer does not need to know these things for hiring purposes.

3. Getting a New Cell Phone

For buyers who don’t want to outright buy their new phone, a carrier will often insist on obtaining a credit report or credit score. Because cell phones can now cost well over a thousand dollars, companies do not want to give you a phone only to have you not pay for it.

Applicants who have a poor credit score may be required to pay a larger down payment before the new phone payment plan will be implemented.

4. Buying a Car

The loan you take out from a bank or credit union will be secured by the vehicle being purchased.

However, the better a buyer’s credit score, the better interest rate they will secure. Sometimes, a buyer can even qualify for special 0% interest rate specials if they have excellent credit.

5. Renting an Apartment

Sometimes, landlords or management companies will review a credit score before renting an apartment or home to someone. Landlords want to be sure that an individual has shown themselves responsible for paying their rent on time.

Applicants with a poor credit score might be required to place a large security deposit or could be rejected for the rental. Those with high, excellent credit scores will have applications that stand out from the rest and are definitely at an advantage when renting a place to live.

While it may not seem like a credit score can have that much impact on life, the truth is that it does. An excellent credit score will cause lenders to offer lower interest rates, which in turn will mean more of your money will stay in your pocket.