Highlights:
- Your credit history and credit scores may impact you more than you think
- If you’re applying for a job or apartment, your credit may be checked
- Your credit may impact your utility services, for better or worse
You already know your credit scores matter when you apply for a credit card, make a major purchase like a home or car, or apply for a loan. But did you know your credit history may impact your application for an apartment or a job? Here are 4waysyour credit history and credit scores can play a rolein everyday life.
#1: When you're renting a home or apartment
Depending on the apartment or leasing company, credit report and credit score checks may be part of the rental application process.Like any potential lender or creditor, landlords and leasing companies want to know: what is the likelihood that you will honor your financial commitments? They may look at your credit history to find out if you have a history of missed payments or have delinquent accounts.
If your credit application is rejected because of information on your credit reports, lenders and creditors (including landlords and leasing companies) are required to tell you the reason your application was denied through what’s called an adverse action notice. This notice includes the name and contact information of the credit bureau which furnished the credit report. If you receive an adverse action notice, you are entitled to a free copy of your credit report from that credit bureau.
But there’s also good news: On-time rental payments may be reflected on your credit reports. Landlords or leasing companies aren’t required to report to the three nationwide credit bureaus, but some do; you can ask your landlord or leasing company if they do.
As always, monitor your credit reports to make sure that accurate and complete information is being reported.You’re entitled to a free copy of your credit reports every 12 months from each of the three nationwide credit bureaus by visiting www.annualcreditreport.com. You can also create a myEquifax account to get six free Equifax credit reports each year. In addition, you can click “Get my free credit score” on your myEquifax dashboard to enroll in Equifax Core Credit™ for a free monthly Equifax credit report and a free monthly VantageScore® 3.0 credit score, based on Equifax data. A VantageScore is one of many types of credit scores.
Credit checks by prospective landlords or leasing companies may be hard inquiries, which may impact credit scores, or soft inquiries, which do not. You can ask what type of inquiry will be used.
#2: When you apply for mobile phone or utility service
Like other creditors, utility companies and mobile phone providers may check your credit reports in order to review your history. A history of late payments or other negative information may mean you’ll need to pay a larger deposit, or your application may be denied. The company may also ask you to provide proof of income or a letter of guarantee from someone who can pay your bill if you do not.
Speaking of utilities, there is also a consumer reporting company called the National Consumer Telecom & Utilities Exchange (NCTUE). The NCTUE maintains data including payment and account histories as reported by telecommunications, some paid TV and utility service providers that are members. Your payment history may be maintained by the NCTUE even if it’s not reported to the three nationwide credit bureaus. Some utilities and mobile phone companies may check your NCTUE report.
#3: When you're making utility or mobile phone payments
Most utilities and mobile phone companies don’t report to the three nationwide credit bureaus – Equifax, Experian and TransUnion. But if your account isn't paid as agreed and turned over to a collection agency, it may be reported as a collection account and your credit scores may be impacted.
#4: When you're applying for a job
Federal law allows both current and potential employers to view your credit reports when they are considering you for a new job – or even a promotion. Although not all employers check credit, some industries such as financial services or healthcare may because of the sensitive information their employees can access.
If a prospective or current employer plans on checking your credit reports, they must first get written permission from you. This could be in the form of paperwork you sign when you apply for or first start your job.
Employers and prospective employers must let you know if you do not receive a job or promotion because of information in your credit reports, and must provide you with the name and contact information of the credit bureau furnishing the report.
FAQs
A strong credit history, reflected in good credit scores, will let you qualify for lower interest rates and fees, freeing up additional money to set aside for emergencies, retirement, and other smaller unexpected expenses. Decreasing debt and increasing savings reduces stress and leads to greater financial freedom.
How can credit score affect your daily life? ›
A good credit score may help you acquire a large loan amount, lower interest rate, and a longer payback time. A good credit score will also help in your loan application getting approved. However, your loan application may get refused if you have a poor credit score.
How can a credit score affect someone's life? ›
Credit can impact parts of your life, especially major purchases such as buying a house or a car. It's important to maintain a good credit score so you can qualify for the best terms for loans and credit cards, which can add up to sizable savings over time.
What is more important, credit score or credit history? ›
When applying for most loans, lenders will be sure to focus on your credit score – a three-digit number that plays an important role in qualifying you for loans, credit cards, apartment rentals, and more. However, your focus should be placed on something else instead: your credit payment history.
Why is credit important in everyday life? ›
Credit can be a powerful tool in achieving important financial goals. It allows you to make large purchases (such as a home or a dental practice) that you otherwise would not be able to afford if you were paying in cash.
What role does credit play in life? ›
A good credit score can impact multiple areas of your life, including your ability to rent or buy a house, job opportunities, loans, and more, so establishing a good credit score now will pay off in the future.
How does a good credit score help you in life? ›
A good credit score can mean access to better borrowing terms and lower interest rates, but it also brings other benefits like lower insurance rates, access to better credit cards and greater options for renting houses or apartments.
How can credit be used in the real world? ›
#1: When you're renting a home or apartment
Like any potential lender or creditor, landlords and leasing companies want to know: what is the likelihood that you will honor your financial commitments? They may look at your credit history to find out if you have a history of missed payments or have delinquent accounts.
How does credit rating affect your life? ›
Your financial history can affect how easily you can get a mortgage, rent an apartment, make big-ticket purchases, take out loans, rent a car, and even get hired in some industries. When you apply for a credit card or even a cable hookup, lenders check your credit rating.
What are three ways your credit will rule your life? ›
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?
7 Ways Good Credit Can Make Life Easier — and Save You Money. Good credit can help you borrow money more cheaply, qualify for credit cards, have lower insurance costs and more. NerdWallet writers and editors are experts in their field and come from a range of backgrounds in journalism and finance.
How can credit impact your future as an adult? ›
If you don't have good credit, you may miss out on securing a low-interest rate on a mortgage, personal loan or credit card, and wind up paying more during the term of your loan. But if you establish a good credit score, you can save money on interest payments and use the savings to invest in your future.
Is it true that after 7 years your credit is clear? ›
Highlights: Most negative information generally stays on credit reports for 7 years. Bankruptcy stays on your Equifax credit report for 7 to 10 years, depending on the bankruptcy type. Closed accounts paid as agreed stay on your Equifax credit report for up to 10 years.
Is it better to have no credit history or bad credit history? ›
Having no credit is better than having bad credit, though both can hold you back. Bad credit shows potential lenders a negative track record of managing credit. Meanwhile, no credit means lenders can't tell how you'll handle repaying debts because you don't have much experience.
Is 2 years of credit history good? ›
Anything less than two years is considered a short credit history. Once you have established between two and four years of credit, lenders will better understand how well you manage your credit accounts. A credit age of five years will raise your score as long as you've been managing your accounts well.
What is the use of credit history? ›
Your credit history is important. It tells businesses how you pay your bills. Those businesses then decide if they want to give you a credit card, a job, an apartment, a loan, or insurance. Find out what is in your report.
What is a real life example of credit? ›
There are many different forms of credit. Common examples include car loans, mortgages, personal loans, and lines of credit. Essentially, when the bank or other financial institution makes a loan, it "credits" money to the borrower, who must pay it back at a future date.
What is an example of credit history? ›
For example, it contains details like type of credit account, terms, recent balance, credit limit, date opened, the status of the account, and account history.
