How much do credit scores matter? We often hear or read of someone saying something to the effect of I?m not worried about my credit scores, I don?t plan to borrow money anyway. I?m not a credit score junkie myself, and tend to have only modest interest in them. And I even tend to think that credit scores are one of those competition deals ? you know, the mine?s better than yours kind of thing?
But despite the fact that I?m at least sympathetic with those who are over the whole credit score circus, there is still value in having at least a decent credit score, even if you really won?t ever borrow money again.
Here are some situations where credit scores will have an affect on the outcome ? but not have anything to do with borrowing money.
When applying for employment credit scores matter
Employers are increasingly seeing credit scores as being an indication of your quality as a person. A poor credit score might indicate some level of financial irresponsibility. It can also be an indication that your life is out of control. I?m not saying that I agree with these assessments, it?s just the reality of the world we live in. Whether we like it or not, that leaves us with two choices:
- Maintain a credit score that?s high enough to pass employment muster, or
- swear off employment forever, and opt for self-employment instead.
Renting a house or apartment
If you ever plan to rent a house or apartment, you?ll need to have an acceptable credit score. Multi-unit apartment complexes check credit scores as a matter of routine, and individual landlords are doing it more frequently as well. Maybe you never plan to rent a home again, but if renting is at all possibility in your future you will need to have a decent credit score.
This will be especially important if you live in an area where the rental market is traditionally tight. If there are more tenants than there are rental units in your area, whether or not you get one may very well come down to your credit score. If your credit score is not particularly attractive, you may need to put up an additional security deposit, and that can get expensive.
Various insurance policies
Insurance companies are increasingly using credit scores, at least to determine the premiums they will charge. And though I don?t know this for sure, if your application is otherwise borderline, it may well be that a bad credit score will result in a denial of coverage.
Health insurance companies will use credit scores as a risk factor. Some studies have indicated there is a correlation between poor credit and the number of claims an applicant is likely to file.
Hooking up utilities in a new place
A utility company won?t decline you service because of a bad credit score, but it will still affect you in the pocketbook. If you have a bad credit score, a utility company will most likely require that you put up a security deposit before they will begin service for you. That will not affect the rates they will charge, but it will increase your upfront costs.
Whether you are moving into a house or an apartment, you?ll have a large number of upfront expenses, including a security deposit for rental, or a down payment for purchase, in addition to moving expenses and purchasing certain items that you will need for the new residence. If you have to put up security deposits for a half-dozen utility companies too, you may find yourself unable to afford to make the move it all.
It?s not that we need to become credit score junkies ? I really feel that that game is being overplayed right now. But we need to make a reasonable effort to make sure that we at least keep our credit scores somewhere in the middle ground. That will get us past so many of the ?gatekeepers? of life ? and save us a bunch of money in the process.
Have you ever run into these or other situations where your credit score had an unfavorable effect on the outcome?
You’re right, more and more parties use your credit score to determine rates or offerings. I ran into it at a previous job. They noticed that I had credit card debt issues 6-7 years prior and they did not want to offer me the job. I was able to convince them that those days were behind me and they then offered me the job.
Hi John–They looked back that far?? That highlights a concern of mine, that credit scores mostly work against us. They track our histories, so that we’re never allowed to forget. That’s probably why so many people want to swear them off. I’m sorry to hear about your situation, but happy that they let you explain it. Not every one who pulls our credit is so understanding.