This post was created with support from Credit Sesame in partnership with Kasai Media.
I’ve heard over and over again people say they don’t care about their credit score. I think that is a huge mistake.
As an ex-insurance agent I have witnessed first-hand, time and time again the difference in premium a good credit score will get you. Do you really want to pay thousands of extra dollars every year because you have no credit or bad credit? (Of course you don’t!)
Whether you like it or not your credit score goes far above and beyond getting good interest rates on debt. Here are three ways your credit score is used beyond qualifying for loans and why you should care.
Employment Screening
While employers can’t technically pull your credit score for employment screening they can pull a version of your credit report.
This is normally done as a part of a background check and can have an immense impact on whether or not you get a job. (Think about it. If they have two very similar candidates, pull credit reports and one candidate has squeaky clean credit and the other has a ton of problems who do you think they’ll hire?)
Why Employers Check Credit: Employers will check your credit (granted that they have permission from you) as part of a background check. A good credit report indicates responsibility and financial stability – something that employers are looking for.
Renting an Apartment
Rental companies and even some private landlords normally require a credit check when submitting a rental application.
Since credit scores are meant to measure financial responsibility, depending on where you live, you might have a tough time renting an apartment with zero or bad credit.
Why Landlords Check Credit Scores – Credit scores indicate financial responsibility. Landlord’s only want tenants who will actually pay rent and pay it on time.
Pretend you’re a landlord for a minute. Your primary goal is to make your rentals a source of income. You get two applicants – one with good credit and one with bad credit – who are you going to rent your house to?
Read this post from Financial Samurai for an in depth explanation.
Auto and Home Owner’s Insurance
While the other two scenarios may or may not apply to you I’m willing to bet this one does. And you should definitely care!
Before making the switch to self-employment I was a personal lines insurance agent. I did auto, home, and renters insurance quotes all day long. I have seen first-hand the INSANE difference a good credit score makes over a bad one.
I have quoted almost the exact same policies for different people. Those with bad credit would literally pay up to $3,000 more per year than someone with a good credit score.
And if you’re thinking your credit score only matters for car insurance you’re wrong.
I had quoted a family member’s home insurance policy and it came back at $800 per year. About six months later she decided she wanted to switch. I had to re-quote it with her updated information. Her credit score had fallen 100 points and her new annual premium came back at $3,500 per year. THAT was an uncomfortable phone call.
Why Your Credit Score is Used For Insurance – It’s been proven that people with higher credit scores are less likely to t get into accidents and file claims than those with low credit scores.
Aren’t You Even Curious What Your Credit Score Is?
I’m so glad that I no longer have to pay to know what my credit score is! I check my credit score every few months just to keep tabs on it.
Above is my credit score according to Credit Sesame. You can check yours for free here. Aren’t you even a little curious as to what your credit score is?
What If You Have a Bad Credit Score?
Don’t beat yourself up. Credit scores are not permanent! Just like a credit score can go down it can also go up. Usually it’s the simple things you need to do to increase your score, like paying your bills on time and keeping your debt to income ratio in check. The first step is knowing where you stand.
I haven’t always had a high credit score. In fact when I bought my car I had built so little credit that I got stuck with an almost ten percent interest rate. By taking small actions overtime and being aware of what to do and why I needed to have a good credit score I have been able to significantly raise mine.
If you ever plan on taking out any kind of debt or personal lines insurance then having a good credit score will make a massive difference in the amount of money you save or spend. And if your credit score is less than great that only means you have the potential for a lot of future savings!
How often do you check your credit score?
Trust me if I knew how important my credit score was I would have guided it with my life. Having a bad score only cost you money and can put your life on hold. I check on my score at least once a month and its looking really sexy these last days. It was a lot of work getting it back in shape.
Yeah it takes a lot of time to get it back on track. I didn’t start building credit until about twenty years old. I’m now almost 29 and it’s only been in the past couple of years where it’s really went up.
I’ve heard that employers can pull your credit report and my credit score really affects my auto insurance quotes at times. I’ve been using Credit Karma and My Fico for a while but I’ve heard great things about Credit Sesame as well.
Yes I never believed the impact that credit scores had on insurance until I was doing quotes all day. It makes a HUGE difference – eve when you have a squeaky clean driving record!
You’re so right- and I don’t know why anyone would say that they don’t care about their credit score! They’re the same people that would then complain about having no money. Argh!
I’m a landlord myself, and have recently started credit checking anyone that wants to rent one of my rooms because, as you say, landlords don’t want to be taking in tenants that aren’t going to pay.
Anyway, great article, thanks for sharing.
Thanks, Reece. I think I would probably check credit if I was a landlord too!
It’s so true that employers request credit reports! I worked in recruiting and we checked them for any manager-level or higher position and any position working with funds or finance. We want to make sure you can handle your own money before we let you handle the company’s money!