Everyone makes a big deal about having good credit, but why? Simple. It is a big deal. Society is extremely dependent on using credit to make purchases and decisions. Nowadays, good credit is used for a lot more than just getting a credit card or a loan.
1. TransportationUnless you have a good amount of cash to buy a car, you will have to get a loan. Your credit not only affects whether or not you qualify for a loan, but also the amount and interest rate of the loan. Generally, loan applicants with good credit qualify for larger loan amounts with lower interest rates. You can see an example here.
2. Employment
Many employers conduct credit checks as a part of the hiring process and part of offering you a promotion. If you haven’t demonstrated financial responsibility, a prospective employer might be hesitant to hire you or to promote you to a higher position. Many positions within the real estate industry are now requiring good credit as representation of good morals. Also, the employer might believe your level of debt is too high for the salary offered.
3. Shelter
When it comes to where you live, having good credit is important. Mortgage lenders want to know that you won’t default on your mortgage. If you don’t have good credit, the lender will consider it risky to give you a mortgage loan. This could result in a higher cost of borrowing or worse, a denial of the loan. You can see an example here.
Not buying a home? You still have an issue. Your credit is used for rental decisions, too. Landlords consider your lease as a loan. You’re being loaned a place to live and the landlord wants to know you’ll pay back this loan. If you don’t have good credit, you can get denied for an apartment.
4. Utility Services
Your credit is also needed to establish utility service. Your electric company states you are borrowing one month of electric service. So, before turning on your electricity, the company will check to see if you have good credit. This applies to most utility services including sewage, cable, telephone, water, and even cell phone. If your credit report is inadequate, you will be requested to make a high deposit or even get a co-signer in some states.
5. Entrepreneurship
Many people have dreams of starting their own business. Most business startups require a sizable amount of cash that you might not have available. In that case, you’ll need to obtain a small business loan and guess what? You will need good credit to qualify. Not only that, but if your new business needs to be bonded, your rates will be based upon your personal credit.
6. EmergenciesEveryone runs into emergencies here and there. Are you prepared? You might need some cash available for a last minute emergency trip to visit family, a good last minute investment or some unfortunate high cost medical issue. Credit cards can come handy. Banks willing to loan you money can come handy too.
7. Insurance
Mandatory vehicle (car, motorcycle, recreational merchandise, etc.) insurance, life insurance, home insurance and health insurance providers along with many others, all run your credit. Drivers with top scores could pay up to 31% less on their premiums than if credit scoring wasn’t factored in, while those with bad scores could pay as much as 143% more.
8. Relationships
And we are talking about the romantic ones. You should not be surprised to find out there are dating sites that measure your potential as a romantic partner based on your credit score. New York Times states “dating someone with poor credit can have real implications(…)” as you or your significant other can become more of a liability than a plus.
9. Emotional Health
Stress, disappointment, embarrassment, anxiety and fear are all feelings that have been associated with poor credit. Confidence and tranquility come from knowing credit is not an issue.
Since your credit is defined by how you have paid (or not paid) your bills in the past, many businesses – landlords, mortgage lenders, insurance companies, utility providers, employers and even a potential mate – use your credit to predict your future financial responsibility. Anytime you need to borrow money, or even services, your credit is called into question. This is why maintaining good credit is so important.