Do you know your credit score?
A 2017 study by MoneyTips found that many people don’t. In fact, less than 53% of people under 30 knew their credit score, while over 75% of older adults knew theirs. This is dangerous because your credit score is vital to your financial wellbeing. I’m sure you’ve heard the phrase, “It’s better to have it and not need it than need it and not have it.” Well, I think you could say, “It’s better to know your credit score and not need it (so you can make it better) than to need a good score and not have it (because you didn’t check).”
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Surprising Ways Your Credit Score Can Impact Your Life
What is a credit score?
A credit score is a 3 digit number that relates to your likelihood to repay debt. In other words, it represents your ability to pay back what you have borrowed. This number is generated from your credit report, which includes the types of credit used (student loan, credit card, auto loan, etc.), credit length, amounts owed, payment history (on time, late, in collections) and new credit accounts. Last year, I attended a lecture by finance expert, Tonya Rapley of My Fab Finance, where she said, “your credit score is your life GPA.” I suddenly cared more about my credit score and quickly checked to see how I was doing.
How do I check my credit score?
One of the easiest ways to check your credit score each month is with Credit Sesame. It takes about 2 minutes to create an account and retrieve your score. There are some websites out there that charge you. That’s how you know it’s not legit. Credit Sesame can never charge you because they never require your credit card information. The best part about using Credit Sesame is that they give you personalized tips to help improve your score. This will allow you to set goals that are attainable for you! Check out my vision board post for more info on creating SMART goals.
You can also request a free copy of your full credit report from Equifax®, Experian®, and TransUnion® once each year by calling the toll-free number: 1-877-322-8228 or at AnnualCreditReport.com. I highly recommend you request one every 4 months versus all at once so that you can catch any errors that may negatively impact your credit score.
How can my credit score impact my life?
I know from personal experience that there are many ways credit scores affect our lives. With a good credit score, you’ll be approved for lower interest rates, which helps you keep more of your hard-earned money in your pocket. For example, I had excellent credit when I applied for an auto loan and was able to get a <1% interest rate. With poor credit, you could end up with a 20%+ interest rate, or you could be denied altogether. Besides loans and bank accounts, you may be surprised by the other uses for your credit score.
1. Getting Hired
My first post-undergrad job required a credit check. I was so nervous because I didn’t even know my score at the time. Luckily, it was fine and I was hired at an amazing company. If you are considering a career in financial services, temporary services, law enforcement and defense, you will likely be asked to authorize a credit check.
2. Renting a home or apartment
Quick life lesson so you don’t repeat my mistake. If your friend is not approved for an apartment due to their credit score, DO NOT sign a lease with him/her. The first time I ever learned credit could affect my ability to rent an apartment was right after college. I was very responsible with my money (mainly because I didn’t have much). My roommate, on the other hand, was not. I was left with over $7,000 in unpaid rent & fees when she moved out and refused to pay. I should have never signed the lease after finding out why she was denied initially. You also don’t want to be put in the position where you need someone else’s good credit to be approved for a rental.
3. Home and auto insurance rates
Last year my auto insurance went up $100/month!! I had no idea why because I hadn’t filed any claims in the past year. After doing some research, I learned that my credit score could have affected my rate. If insurance companies feel that you are riskier, you could end up paying more for the same coverage you already have.
5. Credit cards
Although I’m trying to reign in my spending, I think using credit cards with good reward systems will save you money in the long run. I wanted to apply for a specific travel card to earn points & free travel. Before I applied, I checked my approval odds on Credit Sesame (another great tool on the site!). I was approved quickly and in less than 3 months I have earned about $2,000 in free travel credits/points! To be approved for an excellent rewards card, you must have good-excellent credit. You can also get a higher credit limit if you have a higher credit score. This helps improve your score even more because it reduces your credit utilization.
How often do you check your credit score? What has helped you improve your score?
This is a really interesting post. I had no idea that my credit score could impact my insurance rates.
These are some great insights as many people do not know how much their credit score can impact them later on! It is also beneficial to know ways of rebuilding your credit score since that is something very difficult to do.
Great info, credit is so important, I like the idea of viewing your credit score as your life gpa
Great information here. You’re absolutely right – good credit is key for so many things. I found this especially true when my husband and I were applying for a loan to buy our first house. Because we had good credit, we were able to get a lower interest rate. My credit card offers a free credit check, so whenever I open the app on my phone, I can look at it. That has been a good motivator for me, since the information is right there:)
This is so good to know! I wish more people realized that their credit score could affect their ability to get hired.
Yes it is very important. I’ve learned the super hard way. I had some life trouble & stopped paying mine for awhile. My score tanked. I had always paid very responsibly each month in the past. I had perfect apartment history- this is another “score” basically how good of a tentate you are, if you always pay on time & don’t have noise complaints etc. Anyway, once my score tanked, I couldn’t even get a job to repay the cards. Finally I got hired at Subway and worked minmum wage paying all my bills, but couldn’t get a new credit card except for a secured card at a bank and I wasn’t a fan of that idea. I rented an apartment, and had to use my car note for a loan to pay my apartment. I ended up with an eviction because I was living paycheck to paycheck & didn’t receive my paycheck! It was terrible, finally, after a few years the negatives have aged off & I’ve gotten some starter unsecured credit cards. I ended up switching banks & getting approved for an unsecured card with my bank & did take an unsecured card with another smaller bank because I didn’t want to risk a hard pull if I didn’t get approved. I took a lease with a cosigner who never missed any of his payments on our apartment, and still am nervous about applying for an apartment lease. I feel more comfortable getting a mortage at this point. Ive never financed a car, but am considering getting on the waiting list for the new lower priced teslas which have an $1000 downpayment to hold your spot.
It’s been incredibly difficult, but I’m still learning from others and really like this post. Theres so much good information in it. Thanks for writing. I hope it saves others from my situation which has been a terrible mess. Don’t ever give up your score for anything!! Protect it like gold!!