The objective of any credit score is to act as a numerical representation to future lenders of your financial behavior and how much of a risk they would take with you as a borrower. But, the effects of your credit spread much further than just the lender. Understanding and preparing for credit checks in various aspects of your life is a must.
Low Scores = High Premiums
Insurance is essential to protect yourself and your assets from potential dangers, and a poor credit score can wreak havoc on your premiums. In fact, a study from InsuranceQuotes reported that those with excellent credit scores could pay 36 percent less than those with fair credit and less than half of what those with poor credit pay for home insurance.
Car insurance premiums also skyrocket based on your credit quality, though the process is a bit more complex. While other lenders look to determine how likely you are to pay back a loan or debt, car insurance issuers typically focus on your likelihood to file a claim.
For example, a single driver in Maryland with a clean record and poor credit could be charged as much as $1,759 more for their premium compared to a driver with an excellent score, regardless of their driving history.
9 to 5? Not so Fast
Employers want and need to know that the person they’re hiring is responsible and reliable to mitigate the risk of company theft or fraud. One way to accomplish this is to run a personal credit or financial check, which employers must explicitly request from potential employees under the Fair Credit Reporting Act. Credit checks can impact the likelihood of scoring a new position by displaying your payment history, the amount you owe on a loan and any available credit you have.
In a survey from Demos, 25 percent of unemployed respondents said a company requested a credit check as part of the application process and 10 percent have been told they would not be hired due to the information in the report.
Get Your Credit in Check
Knowing the effect that a credit score can have on your life and making sure your finances are in order is vital to reaching your goals. Follow these steps to get started:
- Know What You’re Dealing With: Before applying for insurance or employment, proactively check your credit score so you can fix any errors.
- Have a History: Keeping old accounts open for an extended period of time increases your score by showing you have experience maintaining credit.
- Apply for an APGFCU® Visa® Card: Build credit with one of our low-rate cards and take advantage of automatic payments to help make payments on time and boost your score!
Learn more about how we can help you improve your credit history through our partner, Greenpath.