The Impact of My Credit

Your credit history and credit score impact your life in many ways. It goes beyond just getting an auto loan, mortgage or credit card. For one thing your credit rating determines what type of interest rate you’ll be subject to by the various lenders you want to do business with. If your credit is bad, the lenders award you with higher interest rates or they simply won’t provide you a loan or credit card.
Let’s take a look at how credit impacts other parts of your life.

Debt-to-income-ratio: Your debt-to-income ratio measures how much money you earn compared to how much debt you owe. The higher the ratio is – meaning, you owe more debt in contrast to the amount of money you are generating – the less likely you’ll get another loan or credit card. That’s because a poor debt-to-income-ratio measurement tends to stop lenders in their tracks. It tells them that you won’t be able to pay off your bills because you already have accumulated too much debt.

Insurance: Insurance companies commonly review your credit history when assessing your application for insurance. They believe that lower credit scores translate to higher claims filed. That’s their assumption, and the consequences are lower credit scores equal higher insurance rates.

Cell Phone Contracts: Cell phone companies check credit reports, too. They want to make sure the person they are giving a contract to can make the monthly payments. If you have a low credit score because your credit report is riddled with late payments, then you may have to put down a large deposit to get service or settle for a prepaid cell phone.

Employment: In some cases employers want to know about your credit history. In their eyes it’s a device that opens up a part of your past. A credit report with a history of late payments, missed payments, bankruptcy, liens or other negative items signals potential problems; it reveals to the employer that this person may not be a reliable employee.

Landlords: Yes, believe it or not landlords are very interested in your credit report. It tells the story of your financial history and whether or not you can be trusted to pay your bills on time. If a landlord looks at two potential renters, and one has a credit report full of negative items and the other report is clean – guess who’s getting that beautiful apartment?

Debt Collectors: Debt collectors don’t call on people just because they have poor credit. However, if you have bills that are long overdue, there’s a good chance a debt collector will start calling – and being hounded by a debt collector is not a pleasant experience.