Cracking your credit score

Cracking your credit score

Asking yourself, “Why does my credit score matter?” For a lot of reasons, some of which you may not even be familiar with. You know that you need a solid credit score to get a mortgage or a car loan.

However, even if you’re not planning on getting either of those credit services in the near future — or any credit services at all — there are still reasons why you need to care about your credit score.

What Is a Credit Score?

credit score is a way of distilling your relationship with debt down into a three-digit number. The scores run from 350 to 850 and vary based on the scoring formula.

For the most part, unless you’re actively seeking credit products, if y

our credit score is 650 and above, you won’t notice it in your day-to-day life. The problem comes in when your credit score dips below 650. Your credit score matters because the lower it goes, the more likely you are to default on debt in the eyes of creditors and lenders, and the more likely you are to receive higher interest rates on credit and loans.

Unexpected Consequences of a Low Credit Score

So, you’re not looking for a car loan, a mortgage or even a new credit card any time in the near future. Why should you care about your credit score?

  • A 2012 study conducted by the Society for Human Resources Management found that 47 percent of employers used credit checks as part of their hiring process.
  • Many mobile phone providers likewise run credit checks. T-Mobile estimates that fully half of all Americans don’t qualify for mobile deals advertised. In a worst-case scenario, you might be stuck with pay-as-you-go plans.
  • Nearly half of all landlords report that a credit check is in the top three factors when deciding who to rent to. So a bad credit card score might keep you out of the apartment you love. Additionally, landlord 

    s might request higher deposits or up-front rent payments.

  • Some car insurance underwriters charge higher rates from people who have less-than-ideal credit. According to Consumer Reports, even those with good credit could be paying hundreds more each year than those with excellent credit.
  • In the event that you do need to apply for credit or loans, you may not qualify for the best available products. That could mean higher interest rates and annual fees, and fewer perks.


Raising Your Credit Score

If you’re worried about any of the above, it’s worth putting some time into raising your credit score. Some actions that can help with this include using a credit card responsibly, such as paying every bill on time every month, maintaining a relatively low credit utilization ratio, and being thoughtful about when and how many new accounts you open over time.


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