An uncertain economy has led many people to make difficult choices regarding their personal finances. Many of these decisions involve making timely payments and have effects on the credit histories of consumers.
However, credit scores have a broader impact on your cash flow aside from interest rates on mortgages, credit cards or car loans. By understanding how information from the credit bureaus impacts overall finances, you can make more informed financial decisions. Here are 3 ways a credit score impacts your life beyond loans:
Consensual background checks that include credit reports can factor into hiring decisions. Companies may feel credit history reflects good judgment and character. Employers also aim to minimize liability by showing due diligence in the hiring process. This is especially common in the financial sector, where employees might have access to customer accounts.
Items such as tax liens, wage garnishments and bankruptcies could be treated differently than a recently missed payment or a few delinquencies. A best practice is to review a recent credit report and be prepared prior to the interview process.
Cell Phone Plans:
Are you hoping to score an advertised price on the latest smart phone or other mobile device? Cell phone companies perform credit checks to determine if you qualify for incentives. Those who do not meet the needed criteria will likely pay full price for their cell phones. No contract plans that do not require credit checks are available through most phone carriers. However these plans may limit selection or have no phone discounts.
Underwriters will factor in credit reports when calculating your auto insurance premiums. A spotty credit history results in higher rates or inability to obtain coverage from particular insurance companies. A slew of car insurers that cater to those denied coverage by brand name companies have emerged. Such policies usually entail higher premiums and may require payment for several months in advance, depending on the individual.
Making personal finance decisions involves difficult choices with short and long term tradeoffs. Your credit score is directly and indirectly tied to multiple aspects of personal finances. Consumers should obtain a copy of their most recent credit report at least once a year and review for inaccuracies. Knowing your rights under the Fair Credit Reporting Act is also an empowering step in taking control of credit history.
Reviewing the factors that most affect your credit score will clarify how to improve ratings with a practical approach. These steps allow consumers to view credit as a valuable tool that can enhance financial well-being.
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