Credit scores — who cares?

Posted by ForSaleByOwner Staff

Who cares about your credit history?

Think of it this way: only your mother loves you regardless. Your credit score infiltrates every corner of your financial life.

Apartments – Credit report plays an important role when taking an apartment on rent. The rental agency or the landlord would want to look for negatives in your credit report to check whether you will be a responsible tenant or not. They would want to check all the information you have provided on you rental application. Depending on your credit report, you may have to pay higher rent or need a co-signer or may need to put in a larger deposit. Credit scores do not get effected by inquires from rental applications.

Auto loans – Auto loan rates available to you are dependent on your credit scores more than the credit reports and finanacial history. A high credit score (750+) makes for the best loan deals which could at times be as low as 0%. Those with low credit scores may also be approved for loan but at much higher interest rates. Online lenders and credit unions give the best auto loan rates, but too many inquiries from auto loan applications lead to lowering of the credit scores.

Cell phones – Based on your credit scores a cellphone company decides which service plan to provide to you. If scores are low, you may be asked to pay extra or a large downpayment for a service contract. Although some contracts allow cellphone companies to check your credit reports at any time, there are some cellphone services that do without the check also. Cellphone application inquiry is visible in your credit report and lowers your credit score sometimes.

Checking accounts – Instead of checking your credit reports, bank checks the ChexSystems report to be able to grant you a new bank account. The ChexSystems report is based on the number of negative banking like bounced checks and not on your credits’ report.

Child support enforcement agencies –Credit reports and child support payment records are checked by child support enforcement agencies. Such inquiries do not lower the credits scores and are not visible in the credit reports. Non-payment of child support can lower the credit scores drastically as this gets reported by the child support agency to the credit bureaus.

Credit cards – Credit card companies review the credit scores of currnet customers as well as the new applicants. Depending on your credit score and history, you will be given the rate options. Even for existing customer, the rate gets adjusted based on credit score reviews and payment history. Only those with very high credit scores are given reward cards and cards with low APRs. Those with low credit scores can go for secured and pre-paid credit cards. One should be careful since a credit card application inquiry decreases their credit scores.

Employers – Your credit scores are not effected by an employer checking them. For a prospective employer to check your credit scores, the employer needs to take permission. Their intent is to look for negative points in your credit report and to know your credit history. An employer can review the credit reports of existing employees only if prior declaration has been made that such an action can be taken. Any adverse action can be taken by the employer only after notifying you beforehand and giving you a copy of your credit report.

Government assistance and licensing – Limited information like name, current address and previous address, current and previous employers, from your credit report can be accessed by any government agency without taking your permission. Only if you are applying for government assistance or specific licenses credit report needs to be checked thoroughly.

Insurance – Credit information is used by home and auto insurers for deciding on the terms and conditions and the rates. Although the way your reports and scores are used by the insurers is not exactly the same as they are used by creditors, the basic standing and data used is the same. The “insurance risk score”, which is calculated based on your credit data, determines the insurance rates applicable to you. Credit scores are not affected by such a credit inquiry even though it appears in your credit report.

Mortgages – A detailed review of all three of your credit reports and credit scores is made as part of your application for mortgage loans by the mortgage lenders. This is because a mortgage is usually for a large amount compared to auto or student loan. A credit score greater than 700 is necessary for getting standard mortgage interest rates. Mortgage application decrease your credit scores and are visible in your credit reports.

Student Loans – Student loans’ interest rates are based on the national rates and therefore, federal student loans do not require a credit check. Credit reports are not checked by the new lender if federal loans are consolidated. In very specific situations or in case of private student loan applications, the credit reports are scrutinized.

Utility Accounts – Utility companies like electricity, cable, etc. check your credit scores for deciding on your rate. This check is performed with your permission and does not negatively effect your credit scores. If you have a low credit score, these companies may ask you to give a deposit, have a co-signer or pay higher amounts for the service. In states like Arizona, Texas and California, which have community