A low FICO Score can cause issues in situations you might have never considered.
Sure, we all pretty much know what a good FICO Score is, what a bad FICO® Score is, and how both can impact getting a loan. From mortgages to credit cards to auto loans, your credit score is key. But did you know a low credit score or negative credit report information can affect your chances of getting a job… insurance… even getting electricity?
Most people work on increasing their credit score and enhancing their credit report data in order to get a loan or enjoy lower interest rates. However, there are other reasons we need to keep our credit profile as stellar as possible…
Current and potential employers can see a modified version of your credit report called an “Employment Report”. This report contains much of the information about your loans and credit cards that’s listed in your credit report. Items like date of birth, account numbers and spouse references are omitted. Although the biggest users of Employment Reports are companies in the defense, chemical, pharmaceutical and financial services, other industries are starting to use them more and more. Why? They feel this report helps serve as a general indicator of an applicant’s financial honesty and personal integrity. It also helps verify application information in order to detect fraud.
Landlords need to know you’ll be able to pay your rent. When renting their home or apartment, the last things they want to deal with are the time and expense of evicting a tenant. When they check your credit score and report, they’ll be able to see your past late payments, evictions and current debt burden, which gives them a good idea if you’ll be a reliable paying tenant… or not.
It’s a fact (as proven by insurance company actuaries): the lower your credit score, the more likely you are to have insurance claims. Therefore, people who have lower credit scores are typically charged higher premiums. It’s the insurance companies’ way of protecting themselves and applies to all types of insurance policies, whether it’s home and rental, auto or health.
When you’re moving into a home or renting an apartment, you typically need to apply for utilities like water, electric and gas. Basically, applying for these services is applying for credit, so these companies will check your credit history (specifically your utility payment history) and then approve or decline immediate activation. If you are a new utility customer or have poor payment history, the utility company will probably request that you pay a deposit as a guarantee of payment.
Similar to utility companies, if you have bad credit, cell phone companies will want you to put down a deposit for service. Most likely you’ll also lose access to the special offers and free equipment they offer for new contracts. Since cell phone companies are essentially “loaning” you the cost of each month’s service, they want to be sure that you’ll pay on time. If your credit is good, no problem. If it’s not, they’ll probably want money up front.
Last but definitely not least, there’s the personal aspect of how bad credit can affect people’s lives. According to Jeffery Dow, a Faculty Fellow at the National Marriage Project, bad credit has a terrible impact on marriage. His research shows that financial disagreements are the leading cause of divorce in America and that financial conflicts are a top predictor of future divorce.
So, it doesn’t seem to matter whether your situation is personal or professional, both your credit score and credit report are big parts of your life. And that’s why it’s so important to keep an eye on your credit file and always know what’s going on in your reports – it could end up making life a lot easier down the road. You might not know when you’ll need good FICO Scores!
At myFICO forums, there are discussions about all types of topics – even those referred to in this blog! Take utility credit checks for instance…
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