Your Credit Score Is Used For More Than Credit
Many years ago, before the government became involved with the Fair Credit Reporting Act, credit reports and credit scores were hidden from the public. We all knew there were credit reports and credit scores, but we couldn’t get access to them. It was terrible, which is why the government stepped in to protect consumers rights.
However now we face a whole new set of challenges. Many years ago, the reports and scores were used mostly to decide whether to accept a loan and at what terms. A good score meant the interest rate on your 30 year mortgage was lower, a bad score meant your car loan cost a little bit more. Today, your credit score is used for a lot of things, only a few of which actually have to do with credit.
Potential Employers
The biggest and scariest new application of your credit worthiness is with new jobs. Employers are starting to pull credit to determine whether or not to offer you a job. They aren’t allowed to make decisions based on bankruptcies, but apparently they like to use other parts of your report to decide whether or not you’re a risk. Miss a few payments? Maybe you’re more likely to steal something.
Insurance Premiums
For whatever reason, and they won’t disclose it, insurance companies believe that the lower your credit score, the greater your insurance risk. The lower your score, the higher your premiums. Their actuaries have analyzed the statistics and the end result is that your score is being used to determine how risky it is to insure you, your car, your house, and everything else.
Cell Phones & Services
Finally, service companies use your credit to decide whether or not they will give you a service contract. If you have trouble making a credit card payment, they worry that you’ll have problem making a cell phone bill payment. The cell phone business model is especially sensitive to this because they often give you a phone for free, hoping to earn it back on a two year service plan. If they are worried you can’t pay, they won’t give you the phone.
As you can see, your credit score is starting to be used in areas it was never intended, so it’s important that you make sure you regularly review your credit reports, check your free FICO credit score, and ensure it’s as accurate as possible.
Jim is the editor of personal finance blog Bargaineering.com and writes about money issues from budgeting to investing, from credit cards to banking. To learn more, check out Bargaineering or follow Jim on Twitter.
