Oct 18, 2019

Here’s How a Poor Credit Score Can End Up Costing You BIG

Young man visibly upset reading a rejection notice

Three digits can make or break your finances. As the numeric representation of credit health, credit scores can increase buying power or close the doors on living a desired lifestyle. Generally, credit scores range from 300 to 850. Scores at or below 600 are typically considered poor.

 Credit scores are calculated using the data in your credit history reports. Here’s a quick summary of how it works.

  • Experian®, Equifax®, and TransUnion® are the main credit reporting bureaus that collect data from your creditors and compile credit history reports.
  • FICO® and VantageScore® are the primary credit scoring agencies that use the data from credit history reports to calculate credit scores.
  • Creditors, lenders, service providers, and employers review credit history reports and credit scores to assess your financial responsibility. 

 Credit scores affect credit card and loan approvals. They also affect your chances of securing the lowest interest rate and desired repayment term. But, there’s even more at stake.

 Read on to learn how poor credit might cost you BIG!

 Increased Insurance Premiums

 Taking time to shop insurance rates is a smart financial move since it can save you hundreds a year. However, even with a good driving record and zero insurance claims, that savings might evaporate due to poor credit. Insurance companies review your documented financial responsibility when calculating premiums.

 Higher Utility Costs

 While utility companies aren’t extending a line of credit to customers, credit health can play a role in how much is charged for services.  Monthly gas, electric, water, sewer, and garbage disposal usage make up most monthly utility bills. But, poor credit can cost you before you receive your first utility statement. The utility company may require a deposit before entering into the service agreement. Or, if you rent an “all bills paid” apartment, your landlord may require a higher security deposit.

 Lost Job Opportunities

 Depending on the career field and job desired, your demonstrated responsibility with credit can keep you in the running for a coveted position. Potential employers may request access to a condensed version of your credit history report as part of a comprehensive background check. In a competitive work environment, employers may use poor credit as a way to quickly weed out applicants.

 Challenging Apartment Leases

 Do you dream of moving into a luxury apartment near upscale shopping, restaurants, and work? Your dreams may not come true with poor credit. Landlords want assurance that rent will be paid according to the rental contract. They review certain aspects of your credit report to confirm whether you have a history of breaking lease agreements or stiffing your creditors. If a landlord believes you’re a high-risk renter, they may deny your rental application or demand a higher security deposit.

 Improve your credit health by paying your bills on time and keeping your credit account balances low. Learn more about financial management with Money Coach @ Hughes, a free online program to help you make wise financial decisions. If you’d rather speak with a professional about your current financial challenges, HFCU Financial Services is here to help.  A knowledgeable Certified Financial Planner™ can review your situation and develop a plan to improve your credit and your finances.