Good credit is not something that is only needed if you plan on flipping buildings one day. Good credit is something that people will need on many occasions throughout their life. In this post I will point out some examples of when having good credit may impact your life in a big way.
Buying a Home
In order to be able to get a bank to approve you for a mortgage, you will need to have a good credit score. Income alone is not enough, even if you earn a million dollars a year. Just the opposite, for a mortgage, credit is even more important than income. If your income is not perfect, then you can still have someone co-sign on the loan and get approved. But if you don’t have good credit then a co-signer will not help you.
When applying for a mortgage, good credit will also make a difference in the interest rate you will be paying. The higher your score is, the better interest rate you will receive. So, starting early and building a good credit score can save you thousands of dollars in interest when you decide to buy a house.
FICO estimated that a borrower with an 800 score might have an interest rate that is 1.5% less than a borrower with a 680 score. The difference for a $300,000 loan might be more than $3,000 annually!
When applying for a credit card, banks will check your credit score, and based on that they will determine if they want to approve you for a credit card. In order for you to get approved for a credit card (and come on, no one uses cash anymore) you need to first build credit.
Auto Loan or Auto Lease
When applying for an auto loan or car lease, banks will always pull your credit before approving you for the loan. In order to get the best deals on an auto lease (the advertised rate) banks will want you to be in the prime credit category, which is usually a 720 plus credit score.
When shopping for auto insurance a good credit score will work for your advantage. Insurance companies look at someone that is responsible for his credit as someone that is also responsible when driving, therefore he deserves a lower premium.
The Money magazine published an article with a research report that shows that a poor credit score can have a bigger influence on your insurance quote then a drunk-driving conviction! Astonishing enough, but auto insurances find that a person with a poor credit score is more likely to cause an accident than someone with a DUI conviction!! (Based on this, you may want to ask the driver before entering a car what his credit score is!)
When seeking a job, those with great credit history have a better chance of being chosen to fill a position than those with poor credit history. Employers will ask consent and pull an applicant’s credit report before hiring employees.
It is believed that about 60% of employers will factor in a credit report before hiring a candidate for a job. A survey conducted by Demos found that one of ten people that were denied for a job was due to credit!
Renting an Apartment
Landlords may request to view your credit report before allowing you to rent their apartment. An applicant with poor credit history may result in a landlord asking for a larger deposit, asking to find a co-signer, or not renting you the apartment at all.
Landlords don’t look as much on your credit score before denying a potential tenant, but they will look for charge off accounts, public records showing judgments, bankruptcies, etc., showing that you were in deep financial trouble. But if a landlord has two applicants to choose from, I believe a good credit history may be a reason for the landlord to choose you.
Here in this post I only wrote a few examples, but of course, there are many more situations where credit may impact something big in your life. So please be a pro and make sure you’re the one with the best credit score on your block! The first step to take in the right direction is, of course, to apply for a credit card which will help you build credit. You can find some great and easy to get approved for credit cards here. If you have questions feel free to email me at [email protected].
Wishing You a Lot of Successes on Building Your Credit!