Over 60% of Americans aren’t sure what a credit score is. Only about 30% of Americans check their credit score more than once a year, and most people aren’t sure how a credit score is calculated or what they should do to improve it. With all of the conflicting advice and information out there about credit scores, it can be hard to know for sure – does credit score matter?
So – does credit score matter?
Your credit score isn’t the be-all-end-all of financial wellness, but it is a good indicator of how you’re doing. It turns out that having a worse credit score can also be pretty expensive. The unexpected costs of a poor credit score add up. You also may not be eligible for things like loans or cell phone plans.
If you’re still wondering, “does my credit score matter?”, keep reading! This week, we’ll give you eight reasons to care about your credit score.
1: Access to Borrowing
Whether you need a car loan, a new credit card, or a mortgage, your credit score is an important factor that creditors consider when deciding whether to approve you at all. Your credit score indicates your ability to and likelihood of paying back your debts on time, so a poor track record with credit can be a big red flag to creditors. You may not be thinking about buying a home or car right now, but it’s hard to make big improvements to your credit score quickly. It’s easier to build and maintain good credit now, so that you’re not stuck, unable to get a loan when you need one.
2: Access to Renting an Apartment
If you’re not worried about a mortgage yet, chances are you’ll need to rent an apartment. When your potential landlord decides who to rent to, they want to ensure they choose someone who will pay on time. Again, they’ll use your credit score to measure how reliable you’ll be when paying your rent. In some cases, your credit score could be concerning enough that a landlord wouldn’t rent to you at all. In other cases, landlords may require several months’ rent up front, or a higher security deposit.
3: Lower Insurance Rates
Having anything lower than an excellent credit score can actually cost you more on car insurance. Insurers take information from your credit report and calculate a separate score that’s based on your credit score. Then, they use that information to calculate your premium. The exact amount this will cost you depends on your home state, your credit history, and your driving record. For example, a single New York resident with a good credit score and a clean driving record would pay $255 more annually than if they had an excellent credit score. An excellent credit score could save you a big chunk of money on insurance costs every year!
4: Lower Mortgage Rates
A better credit score also gives you access to better mortgage rates. That means you stand to save a significant amount of money over the course of your mortgage with a higher credit score. A report from Lending Tree showed that improving your credit score from 719 to 760+ saves you nearly $15,000 on average over the course of a mortgage. The lower your credit score, the more you’ll save by improving.
5: Better Cell Phone Plans
Cell phone providers like to tout affordable deals on cell phone plans. What they don’t tell you? With bad credit, you might not be eligible for those deals at all. Most providers do a hard credit check when you sign up for a plan, which affects the plans you’re eligible for and how much you’ll pay. If you don’t have excellent credit, you’ll need to pay more upfront, and may end up with a longer payback plan.
6: Access to Cable and Internet Plans
Like cell phone providers, most cable and internet providers check your credit score. Depending on your score, some providers may choose not to give you service, although that’s usually not the case. In most cases, providers use your credit score to determine what size your initial deposit will be (if any).
Sometimes, your credit history can even impact your ability to get a job. Employer credit checks are totally legal, and typically give employers access to a modified version of your credit report. While employers won’t see your credit score or your account numbers, they will see if you have a lot of debt, late payments, or high credit utilization. Keeping your credit in good standing will help you present your best self in job interviews!
8: Access to Better Credit Cards
It might seem counter-intuitive, but you actually need to have a good credit score already to be approved for credit cards with the best rewards, perks, and rates. The more you improve your credit score, the more access you’ll have to better credit cards and the perks that come with them. These rewards can save you a lot of money over time, so it pays to have access to these cards.
For these eight reasons (and so many more!), maintaining a good credit score saves you money in the long run with lower rates and eligibility for better deals. A good or excellent credit score also gives you access to things you can’t get otherwise – like an apartment, a loan, or a great cell phone plan. So, does credit score matter? We hope these eight reasons convinced you that your credit score is worth working on.