Many people are just barely aware of the significance of their credit score. For most people, knowing their credit score is just a procedure when applying for their mortgages or credit cards. What’s more, some don’t even realize that their credit scores matter. The truth is, not knowing your credit score can affect your ability to obtain any type of credit approved, in addition to a host of other consequences.
A low credit score means that you are of high credit risk to the bank or the credit card company. In order to compensate for the risk, these companies would than impose a high APR. In the long run, you will be subjected to greater loan costs through high interest rate charges. Thus, you pay more than another borrower who has managed to maintain a good credit report.
If you think that the significance of your credit score is limited to your ability to obtain loans or credit, then you are wrong. As it is legal for several parties to request for your credit score, your landlord and your employer are also entitled to acquire information on your credit score. Landlords are in the risk of getting their rent payments defaulted by errant tenants, which is why knowing a potential tenant’s credit score will provide them with some indication on a person’s ability to pay on time, or even pay at all. If someone has a historical record of defaulting on credit card or loan repayments, it is likely that he will also default on his rental payments. In order to avoid future hassles, landlords would rather rent their properties to people with good credit scores, and thus good payment track records.
Apart from landlords, employers too have the rights to check on their employee’s credit health as part of their decision to hire someone. Their rationale for this is that an employee who is living off credit, and lacks the ability to pay for it, has a greater chance of compromising their loyalty to the company if they are in a situation where he stands to gain financially to do so.
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