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How Your Credit Score Affects Your Everyday Life

Your credit report and credit score are more than just a piece of paper and number.  Your information can affect your day to day activity and your financial well-being.  Good credit will earn you favorable interest rates, a better apartment, a larger mortgage loan, better credit cards, insurance…the list is endless. 

Preparing yourself for good credit is a simple process to get started.  First find out where you stand.  Pull a copy of your credit report.  You are entitled to one free copy of your report per year under the Fair Credit Reporting Act (“FCRA”).  Pull your report at www.annualcreditreport.com.  Review your report with a fine tooth comb.  Your credit report is divided into sections to make it easier to read.  You can review the items that help you maintain good credit and that hurt you.  For example, late payment history, high balances, collection account bankruptcies and public records are damaging to your credit while accounts that are paid timely, have low balances and are in good standing will boost your status.  

Maintaining good credit can help earn you a favorable automobile loan.  Research shows that most automobile lenders base their lending decision solely on your credit score.  A number above 750 will earn you the most favorable rates, potentially even a 0% rate while consumers with a low credit score can see interest rates in the 20%.

When submitting a credit card application, the company will review your credit.  Based on what is reporting, the credit card company will decide whether or not to issue you a card and at what spending limits and at what interest rate.  Credit cards with high credit limits, low interest rates, and reward programs usually only offer cards to consumers with the best credit history and credit score.  Even if you have good credit when issued a card, credit card companies often reserve the right to adjust your interest rate due to lack of payment at any time.   

When applying for a job or even in your current position, an employer can check your credit.  Prior to looking into your financial history, an employer must receive your written consent.  If an employer decides to take action against you based on the negative information in your report, it must follow the protocol laid out in the “FCRA” and provide you with notice of its intention to take “adverse action.”  

Renting an apartment can also be dependent on the state of your credit.  Often times, landlords ask to pull your credit to determine what kind of payments you will make.  If you are consistently making late payments a landlord may refuse to rent to you based on your credit, may require you to find a co-signer who will help guarantee your ability to pay or ask for a larger security deposit.

When applying for a cell phone, telecommunication companies will check your credit and, based on your report, will make the decision whether to issue you a service plan.  Consumers with a poor credit history or a low score may be asked to put down a sizable deposit.

Insurance companies are now using credit reports to determine rates and terms of your contract.  Both home and auto insurance companies use your credit report to calculate your insurance risk score which will help them determine what your rate will be.   

Utility accounts, such as electricity, gas, and cable may check your report.  Consumers with a low credit score may be asked for a deposit or a co-signer on the account.

Your credit report is essential to your financial well-being and your day to day activity.  Keeping good credit will make it easier to get the things you need and the things you want.  If you are in need of assistance regarding your credit report, contact SmithMarco P.C. for a completely free case review.

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