Most people realize their credit score affects their ability to get approved for credit. A lower than average credit score is a warning sign to lenders that you are more likely than most to be late on your payments or default on a loan altogether. Based on this assumption, lenders will either charge you a higher interest rate to account for your high credit risk, or elect to deny you credit outright.
Many of the people trying to clean up credit are looking for a way to improve their credit score for this reason. They are working to get into a new home, purchase a car, or refinance their existing loans, and they realize that by improving their credit score they will increase their chances of accomplishing these tasks and may end up saving thousands of dollars in interest payments.
1) Credit Card Companies Care about Your Credit Reports
You probably already realize that credit card companies will check your credit reports when you apply for a card, but did you know they may continue to monitor your reports after you become a card-holder? Many credit card agreements include a “universal default” provision in which, according to financial guru Scott Bilker, credit card companies “periodically check your credit file and if you’re late paying any other bills, not just theirs, they slam you. Low interest rates enjoyed at the beginning of a credit relationship could, in many cases, double or triple.”
Even if you have a perfect payment history with your credit card provider, they may still jack up your interest rates if they find any new blemishes on your credit reports.
2) Your Good Credit Score Could Help Land You a Job
If you’re not qualified for a job to begin with, then a high credit score won’t make a difference. But if an employer is considering a handful of equally qualified prospects, your credit score may be the deciding factor that gets you in the door. Employers tend to equate your good credit score with being a trustworthy employee so, everything else being equal, if it is you versus another candidate who looks to have been too cavalier with their finances, you may get the nod instead.
Of course, if your credit score needs work, employers may not even bother considering you for a position. With a low credit score, you may not even get the chance at an interview.
3) Good Driver Discount? How About Good Credit Discount
The Insurance Information Institute says that drivers with bad credit file 40% more insurance claims. To auto insurance companies, this means if you have a bad credit score you are more likely a bad driver and is why, according to research firm Conning & Co, more than 90% of auto insurers use credit information to decide whether to issue a policy.
If you have a good credit rating this works in your favor because insurance companies are able to offer lower auto insurance premiums to people they feel are a lesser risk. And this isn’t necessarily limited to auto insurance. Your homeowner’s insurance premiums may also factor in your credit score and while it does not appear to be happening yet, there may come a day when health and life insurance providers will want to take a look at your credit reports too.