Think your credit score doesn’t affect to your life right now? Guess again.
Your credit score is like a fingerprint that tells people at a glance how responsible you are with your money and how much they can trust you—in all sorts of situations.
Even if you’ve just graduated from college and want to live credit-card-free…
Even if you’re not looking for a loan…
Heck, even if you assume you’ll never need another loan again, neglecting your credit score isn’t something you want to do.
Why? Here are 6 big ways your credit score affects your finances and your life in general, both now and in the future.
#1: Your Score Can Save (or Cost) You Money
You may not need a loan (or other financial product) right now, but if you decide to purchase a home or buy a car, you’ll need to have a solid credit history established if you want to get the best possible deal.
Lenders and other financial agencies, from mortgage companies to insurance agents, use your credit score as an indication of your reliability.
A low score is a red flag that tells others you might pose a risk, so they’re more likely to charge you a higher interest rate.
If you have no credit history whatsoever, they have nothing to go on, which means you’ll get hit with less-than-ideal terms because lenders like to hedge their bets. The better your credit score, the more money you’ll keep in your own pocket.
Notice that we mentioned insurance agents. Your credit score is also used to determine another metric called a “credit-based insurance score,” which impacts your insurance premiums. In other words, even if you purchase your vehicle in cash, a good credit score can affect your premiums, thus saving or costing you money.
#2: Your Score Can Influence Your Career
More and more employers are performing credit checks as part of their process for screening job applicants. They see it as another variety of reference check, one that gives them an indication of your discipline, maturity, and trustworthiness.
This is especially important in high-stakes jobs that require a lot of responsibility or deal with a lot of money, like positions in banking or government, but it can play an important role in an employer’s opinion of you for any position.
While there’s plenty of debate as to whether or not it’s fair to take an applicant’s credit report into consideration, the simple truth is that many employers do—and if your credit is less than stellar, it can keep you from getting that dream job.
#3: Your Score Can Influence Where You Live
Homebuyers hoping to secure a mortgage aren’t the only ones who need to be mindful of their credit scores. Renters will find that most landlords include a credit check as part of the application process for a lease.
Landlords are interested in your financial history for two reasons. One, it sheds light on whether they can rely on regular monthly payments from you. Two, your history can also let them know if you have any large debts, delinquencies or other issues that might make it hard for you to afford the cost of rent.
Even if the latter isn’t applicable in your case (perhaps you’ve always lived debt-free with the exception of a small, reasonable student loan), the landlord still wants to see a high credit score so that they’ll have a better indication that you’ll pay rent on time.
If it comes down to you and another potential renter who are otherwise equal, your credit history could make or break your chance to score the place.
#4: Your Credit Score Affects Your Ability to Refinance
Already got a house? That’s great, but what if you didn’t get it at the best interest rate? What if interest rates drop significantly in the future, and you decide you’d like to refinance?
Even if you’ve made every single mortgage payment on time, a bad credit score can keep you from qualifying for a refinance or severely restrict your refinancing options. As a result, you could wind up paying tens of thousands of extra dollars over the course of your mortgage.
#5: Your Score Could Affect Your Love Life
Given all the economic turmoil we’ve seen in recent years, banks and lenders aren’t the only ones concerned with your credit score.
Studies have shown that potential mates today are as likely to evaluate your credit history as your dating history when it comes to deciding if they want to enter into a relationship with you.
After all, when you marry someone, you marry his or her finances, too. If your partner has a ton of debt or a shaky financial history, it can affect everything from handling household finances to buying a house together.
A survey reported in US News, for instance, revealed that 9 out of 10 people consider financial responsibility an important factor when evaluating romantic partners. Three in 10 women and 2 in 10 men said they wouldn’t even consider marrying someone with a bad credit score.
#6: Your Credit Score is a Long-Term Process
It can take years of proper credit use and prompt payments to repair a bad score. And if you have no credit history, it can take years to build a good one.
This is one of the biggest reasons that it’s so crucial to start building a good history now, and to monitor your credit score regularly so you can catch any potential problems before they become a major issue. Your credit score impacts many areas of your life. Neglecting it can have repercussions for years down the line.