Why Your Credit History Matters — Even If You Aren’t Applying for a Loan

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One of the trends taking place right now is a desire to move away from using credit. Another point of interest is the idea that you can get by without a good credit history. After all, if you aren’t applying for a loan, do you really need to worry about what’s in your credit report? Many think that if they already have a home and a car, the credit report doesn’t matter anymore. While it would be nice if this were true, this isn’t always the case.

Your Credit History is About More than Borrowing

In the past, your credit report was mainly used as a way for lenders to determine how risky it would be to loan you money. Now, though, there are a number of people who use a credit history to judge your general level of financial responsibility, even if borrowing isn’t involved. Here are a few of the people who might look at your credit report:

  • Service Providers: Cable (and satellite) providers, as well as cell phone providers, might decide to check your credit before agreeing to provide you with services. If your payment history looks spotty, or if you have a poor credit score, a service provider might be reluctant to deal with you, since you might be late paying.
  • Insurance Companies: Your credit history might be used as part of the criteria to determine your insurance premium. If your credit history is negative, you may have to pay a higher premium. This is because many insurance companies believe that your fiscal responsibility, as shown in your credit report, translates into responsibility in other areas of life. If you have a good score, you are likely to benefit by saving money on your premium.
  • Employers: While a potential employer is unlikely to look at your credit score, he or she could look at your credit report (with your permission). This is especially true if you are applying for a position of some sensitivity, such as a security guard or someone with access to proprietary information. Employers might decide that negative credit items could make you vulnerable to bribes, embezzlement or other problems.

While we may not think that it is right for a credit history to be so important in finances, the fact of the matter is that many people use your credit history. Indeed, there are some who would judge what kind of person you are by what is in your credit report. Whether that is right or wrong may be a subject for debate, but the fact remains that you are likely to be evaluated based on what is in your credit history — for a non-credit reason — at some point. That means that you still need to think about building and maintaining a good credit history, even if you have no intention of applying for a loan anytime soon.

Miranda Marquit is a professional blogger. She specializes in writing about personal finance for a variety of blogs, including FinancialHighway and Credit Score Blog.

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6 Responses to Why Your Credit History Matters — Even If You Aren’t Applying for a Loan

  1. Hi Miranda, checking your credit when applying for a job is very common here in Dallas. If my husband’s score was not high enough, they wouldn’t have offered him a position, and he doesn’t touch money directly. I don’t have an iPhone because of a $30 dispute with Cingular (now AT&T) over a bill, so they would demand an $800 deposit!

  2. Thanks for sharing, Jennifer! You make some great points. Credit histories and credit scores are not just about loans anymore. Just about anything that has to do with money changing hands seems to be fair game!

  3. When I was young and clueless, I just thought that my credit report would be viewed by someone I wanted a loan from. Then I found it was looked at when we went to lease our apartment, when I applied for a job, etc. You are right, it is a lot more important than people probably realize.

  4. Kris – If you’re required to sign any legal-looking or application-type documents that have fine print anywhere, there’s an outstanding chance that there’s a provision allowing the entity to access your credit. It’s a strong arguement for reading all fine print. If you don’t want them to access your credit, either strike out the part that gives them permission (in which case what ever arrangement you’re trying to enter will probably be terminated) or refuse to sign. That provision has become disturbingly common.

  5. I had immaculate credit my entire life – I could get a loan to buy anything I wanted!

    Then I was laid off from my job of many years, and unemployed for a pretty long length of time. A true victim of the economy.

    While doing temp jobs and making a little money online while trying to find a new full-time job, my credit slowly slipped into oblivion and my mortgages fell behind. I am recovering now and slowly getting things back in line, but for someone to judge me as “irresponsible” based on bad luck – getting laid off with another 25% of the workforce – well – how does that make any sense?

    I am one of the most responsible people financially and have been for over 30 years! But since I went through a 2 year span of troubled times, should that wipe away 30 years of hard work and diligence? I certainly don’t think so.

    But hey, that’s the state of the world we live in…love it or leave it I guess.

    By the way, my new employer did do a credit check, but they hired me anyway! And I will NEVER let the credit card companies get the best of me again – they are crooks, if you ask me.

    Cheers

  6. Christopher – I completely agree that the credit system is unfair. As you said, two years of credit problem shouldn’t nullify 30 years of good credit. Unfortunately, that IS the way the credit system works. It’s part of our system-wide attempt to reduce human beings to numbers, that way we can measured, evaluated and judged based on a matrix.

    Fortunately, many employers don’t pull credit, and others who do just see it as one component in a wider evaluation. I also have to think that given the economic situation of the past few years, with so many having come through distress that destroyed their credit, it has to be an equalizer. If too many people have damaged credit, then credit is largely nullified as a factor in determining merit. It’s a good bet that many of the people doing the interviewing and hiring also have bad credit these days!

    Congratulations on landing a job–credit issues and all.

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