Your credit score is more than just a three-digit number. It’s a reflection of how trustworthy you are based on your financial history. Why does it matter? The financial history you’ve built can affect your future in many ways. Like it or not, you’re tied to your credit score, so you want to make it the best you can.
Here are just a few ways your credit score helps or hurts you.
Obtaining Credit Cards
When you apply for a credit card, the credit card company uses your credit score as a basis to determine your eligibility. A high score makes you a safer bet and opens doors to low-interest cards and cards with better perks. A low score means you may have to pay a higher interest rate, or you might be denied a card entirely.
Obtaining a Loan
Are you in the market for a new car or a new home? When you apply for a loan, your credit score is a big piece of the puzzle. Just like with the credit card companies, banks want to know that you are a safe investment. The better your score, the better your chances of getting the loan and getting a good interest rate. You might even pay less money down than you would with a low score.
Renting an Apartment
What does renting an apartment have to do with your financial history? It all comes down to measuring your ability to pay your bills on time consistently. A high score tells a landlord that you consistently pay your debts on time and implies you will do the same with your rent. A high score makes you a more attractive applicant than a tenant with a low score.
Some of your basic utilities like your electricity or even your cell phone provider will check your score before offering you services. If you have a low score, you may be required to give them a down payment to safeguard against an inability to pay your bill down the line.
It may not seem fair, but auto and home insurance companies may look at your score before offering you insurance protection. It all comes down to your perceived reliability. Is it fair to say a person with a low score is more likely to get into an accident or forget to turn the stove off? Maybe not, but applicants with the best scores get the best rates because they are considered responsible and a safe bet.
If you don’t know your credit score, request a copy from one (or each of) the three credit bureaus: Experian, Equifax, and Transunion. It’s free and it will let you know where you stand. If your credit score is high (700 or above) you’re in good shape. If your number is below that, don’t fret. There are a lot of ways you can work to bring that number up.
Your credit score and you are linked. Make sure it represents you well.
David Milberg is a financial analyst from New York City.