September 19, 2017
 
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Credit Score - Who Needs It?

Lenders aren’t the only ones relying on credit scores to predict whether or not you’ll pay your bills. Credit scores are sometimes referred to as FICO scores, named after Fair Isaac Corp. who compiles the information. You may already be familiar with credit reports, but many people, young and old, aren’t familiar with the role the credit score plays when it comes to renting an apartment, qualifying for a loan, or even getting a job.

What’s the Score?
Briefly, a credit score is a three digit number generated by formula which is based on information that is currently in your credit report and compared with the data of millions of other people. In the U.S., the median FICO score is 723, meaning, half fall below and half fall above that point. The top score is 850, but it isn’t very common. The higher the score, the better it will be for you.
 

1.       Lenders—This is the most common group that people associate with their credit score. A high score will give you the most competitive interest rates for a home loan, auto loan, credit cards, or even a small business loan. A low score or even a nonexistent one can make it very difficult to quality at all but if you do, you’ll pay more in interest charges.

2.       Insurers—For decades, the insurance industry has used credit information to help determine if an application is accepted or denied. Further advances have allowed for the development of an “insurance score” based on a person’s credit history to better assess the risk of future claims. Statistically, those with a poor insurance score are more likely to file a claim. Thus, the higher your predicted risk, the higher your rates will be.

3.       Landlords—The leasing industry has used credit scores to predict your ability to pay rent and pay on time. If your score leaves a little to be desired, it may be difficult to get a lease, or at least one without a co-signer. In some circumstances, your rent may be higher.

4.       Cell Phone Services—Increasingly, cell phone companies are conducting credit checks to see how responsible potential customers will be in terms of paying bills and paying on time. You may be required to put down a deposit or worse—not qualify at all.

5.       Utility Companies—Other types of services are also using credit scores to determine your rates. Those with credit problems may be required to pay a deposit.

6.       EmployersCredit reports are gaining popularity among employers faced with the task of finding reliable and honest employees. With your permission, they can look at your credit report. Using it as a screening technique, they can determine if a potential employee would be a good match for positions like bank tellers or couriers. It can indicate financial honesty as well as personal integrity.

Building and maintaining a high credit score will only benefit you and your family, saving you hundreds, even thousands of dollars over your lifetime.

 

 

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