Unexpected Ways Bad Credit Ratings Spoil Your Life
While you may think of credit ratings as a make-or-break yardstick when qualifying for a mortgage or car loan, they also affect other areas of your life. Here are a few lesser known reasons why a bad credit rating or questionable credit history could end up costing you more money.
- Rental Applications: Many landlords and property owners ask for your financial information to prove that you are a reliable tenant who can pay your rent on time. They often do a credit check, although some agree to prove income or previous rent payments with another homeowner. While there is no agreed standard by which you can be denied an apartment, one study shows that a score below 600 could jeopardize your rental application.
- Auto insurance rates: In almost all states, auto insurance companies can use your credit rating to determine your insurance rates. For the same type of insurance, a bad credit rating can cost you nearly double what you would pay with a good credit rating, an average of $ 2,940, as reported by Value Penguin .
- Utilities: Gas, electricity, and water companies will check your credit before allowing you to sign up for their services. On rare occasions, they may deny you services due to bad credit, but they are more likely to insist on a deposit or letter from someone who will agree to pay your bill if you don’t. If you are threatened with termination of your service, you have several options through your state or local consumer protection office .
- Wireless phone rates: As with utilities, the phone company may insist on posting a bond or switch you to a prepaid plan if they don’t like your credit history.
- Hiring: Sometimes (but not always) the employer does a background check, which may include a review of your credit history (although they cannot see your actual credit rating). This is most often done if you are expected to work with money as part of your job, but it is possible that you will be denied based on your credit history. If they do, they must notify the applicant and allow them to appeal the decision (as your credit history may contain correctable errors).
A bad credit rating can be expensive, but the good news is that most of the flaws in your credit history will disappear in a few years. With good credit behavior, your credit score will improve. For more information on how to improve your score, check out this Lifehacker post .