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When Does Credit Matter?
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Michelle
Financial Expert
Posted April 25, 2017
Applying for loans
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This is the reason most people think of when discussing the importance of having good credit. Having a good credit history can help you get approved for loans and credit cards. Your credit score – which is partly based on your credit history – also affects the interest rate you receive. Being able to get loans is important when you are ready to get a new car or buy a home, and it is helpful if you have an emergency expense and have to use a credit card.
 
There are two kinds of credit report inquiries – hard and soft. A hard inquiry is made when you apply for something that would result in a new monthly bill, such as a loan. A soft inquiry happens when your credit report is being pulled but will not result in a bill, such as when you check your own credit report. It is important to note that a hard inquiry can have a slight negative impact on your credit score. So, you should not apply for loans excessively.
Leasing apartments and houses
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Although you are not borrowing money when you rent an apartment or house, you are “borrowing” a place to live because you don’t own it. It is common for leasing companies or property owners to review your credit report when you submit a rental application. Your credit history will show how well you pay your bills. A property owner or leasing company will use this information when determining whether to rent to you. Some leasing companies also use your credit score to decide how much to charge for a security deposit – meaning a good credit score can save you money. Applying to lease an apartment or house would also be a hard inquiry on your credit report because it would result in a new monthly payment.
Getting a job
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Checking a job applicant’s credit makes sense if they are applying for a position that involves handling money. But it also is becoming more common for employers to check all potential new hires’ credit reports. How you handle your finances may not seem like it relates to how well you do your job. However, employers use it as an indicator of how responsible you are. Having positive credit history shows that you can follow through on your commitments. In this case, there would be a soft inquiry on your credit report, so there would not be a negative impact on your credit score.
Getting car insurance
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Believe it or not, insurance companies also check your credit history. You aren’t borrowing any money, but you will have a recurring bill you need to pay – although in this case it is a soft inquiry. Insurance companies will give better rates to people they think are more likely to pay their bills on time. Even if you have a great driving record, make sure your finances are in order so you can get the best rates!
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