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Your credit score and credit history have a huge impact on your life. You might already know that credit scores impact your ability to get a loan and how much it will cost you. But did you know that your employment, cell phone bill, insurance and your ability to get cable could balance on your credit score? Find how credit impacts your life in big and small ways on a daily basis below.
Credit scores play a huge role in your financial life. They help lenders decide whether you’re a good risk. Your score can mean approval or denial of a loan. It can also factor into how much you’re charged in interest, which can make debt more or less expensive for you.
But credit scores don’t just come into play when you’re looking for financing. Many people use credit scores as a way to evaluate you as a person.
Landlords, property managers and rental agencies typically review potential tenants’ credit reports. They look for a pattern of missed payments or other negative information on your credit reports that indicate you may not pay your rent.
If you have bad credit, the landlord or property manager may require you to pay a larger deposit or get a cosigner. They might reject your rental housing application altogether.
Mortgage lenders review your credit scores and reports from the three major credit bureaus as part of the application process. In most cases, a mortgage loan is much larger than an auto or student loan, so the review process is much more detailed.
The score you need to qualify for a mortgage varies by lender, loan type and the general housing-credit market. But the higher your credit score, the better your chances of approval. You also stand a better chance at getting a lower interest rate if you have good credit.
Here’s an example of just how much your credit can impact your mortgage. A lower credit score can result in a higher interest rate. And just a small change in your interest rate can mean a much more expensive home.
Your credit scores influence the auto loan rates available to you. If you have an excellent credit score, you’re likely to qualify for the best loan terms available. If you have very poor credit, you may have trouble getting a loan for a car at all.
Some lenders will work with people with poor to fair credit. However, the interest rate you pay on your auto loan is typically directly related to your credit score. As with the mortgage example above, a lower score—and thus high-interest rate—can significantly increase how much you pay each month on a car loan. It also drives up the total cost of the car.
You might be seeing a trend here. Your credit often comes into play when you’re buying something or seeking out a new service. Here are just a few things you may lose or have to pay more for if your credit score or history isn’t up to par.
It’s no secret that bad credit can affect your entire life. It can make it impossible or much more expensive to get funding or even sign up for necessary services, such as electricity. Poor credit can mean a lack of access to non-necessities, such as cable, or make those services more expensive or more difficult to get.
Bad credit can also impact other areas of your life. It could limit your relationships, for example. Some romantic partners don’t want to become involved with someone who can’t manage money.
Now that you know the huge role credit can play in your life, you may want to make sure your credit score is as strong as possible. First, make sure you understand what factors actually impact your credit score. Then, consider signing up for Credit.com’s credit report card. It lets you monitor the five factors that drive your credit score so you can understand what you may need to change for the best results.
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How to Fix Errors on Your Credit Report
What many Americans don’t know is there may be a lot of errors and negative items on their credit report. In fact, it’s reported that as many as one in five Americans have mistakes on their credit report.
Click here to learn about the strategies used to fix credit errors.
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