There are several situations when your credit matters most. If you don't know much about personal finances, you may view credit scores as nothing more than a three-digit number. Therefore, you may not take the necessary steps to ensure you maintain the highest credit score possible. But credit matters more than you think. Here are seven situations when your credit matters most.
Buying a car is one of many situations when your credit matters most. Of course, you don't need a credit history to purchase a car. Some dealerships offer first time loans to people with bad credit or no credit history. But typically, these loans include a high interest rate. If you want to get a low-rate loan, you'll need to establish your credit history and maintain your credit.
If you don't have a credit history, or if you have bad credit, you're not likely to get a mortgage loan. Mortgage lenders have tighten the belt in recent years. Nowadays, many conventional lenders require a minimum credit score between 680 and 700. To buy a house, you must demonstrate credit worthiness by paying bills on time.
You may feel insurance has nothing to do with credit, but many insurance companies pull credit reports and base premiums on how well an applicant manages his credit. For that matter, if you have a lot of debt or a history of paying bills late, you might pay a higher premium than someone who submits timely payments each month.
Not only do you need good credit when buying a house, many landlords require good credit before they'll approve your rental application. If you have poor credit, you might pay a higher security deposit, or the landlord may require a co-applicant.
You may not realize this, but when you get a cellphone contract, the provider will check your credit. If you don't have good credit or have no credit history, you might have to get a prepaid phone plan and you may not qualify for discount phone prices.
If you've been unemployed for several months or years, you might have difficulty paying your bills which can trigger bad credit. Unfortunately, losing a job has a domino effect. Depending on the field you work in, companies may run a credit check before offering you a position. If you have too much debt or a low credit score, it can be difficult to find jobs in the finance industry and with the local or state government.
If you're paying a high rate on your credit cards, you might contact your credit card companies to ask for a better rate. Unfortunately, if you have a bad credit score, you're not likely to get a better rate. Low rates are typically reserved for people who manage their credit responsibly. This includes those who pay their bills on time and those with fewer debts.
It might come as no surprise that credit matters in a variety of situations. To improve your credit, always pay your bills on time, pay off credit card balances in full every month, never cosign a loan and limit credit inquiries. What are other ways to improve a credit score?