Meet Your Life Partner – Your Credit Score

credit-score

 

When you reach adulthood, you automatically get a new life partner.  Tall, dark, and handsome? Or, tall, blonde, and beautiful?  Keep dreaming, you won’t meet this one on Tinder.  This alter ego determines where you work, your standard of living, and what you can buy.  Basically, it runs your life. It hides behind your couch, if it allows you to have one, and can edge you out of your bed.  This friend shows up uninvited to cramp your style in countless ways.

Meet your credit score, your ethereal mate.  Just about every area of your life is impacted by this relationship.  And talk about being pushed around.  You can get much more flexibility out of a human.

Your credit activity is a telling indicator of your behavior.  It tells the lenders if your habits are trustworthy or not.  In one three-digit number, it either portrays you surrounded by an angelic glow or screams of your hedonistic habits.  The perception is that if you’ve defaulted on previous payments, you’ll probably default again.  That makes you a high risk.  Therefore, this is one bond that should not be neglected.

Young adults are so wrapped up in their social media streams that building a credit reputation is as exciting as teaching grandma how to use Facebook.  But at any age, your credit score runs the risk of controlling your life.

Here’s a few ways your credit score has pull. 

Rental applications: You won’t be able to kick back a cool apartment if your future landlords sees a poor credit history.  In fact, if you’re living with your parents or on a friend’s couch, there’s a good chance you’ll be staying there.  Sorry, but no one wants to support you.

Case in point – your credit score dictates where you live.

As a property owner, I’ve seen applications from employed people where not only did the person not pay their previous rent, they defaulted on their water, electric, and car payments.  Zero credibility there, in spite of earned income.

Loans approvals and ability to get credit: Low credit scores can limit your ability to obtain a loan.  In addition, your lender may turn down your request to raise your credit limit and may lower your credit ceiling or eliminate your account altogether.

Interest rate:  If you have a low credit score, you are guaranteed to pay a higher interest rate than someone with a high credit score.  This could make a significant difference in the total purchase price of a home or car that you’re buying, not to mention your monthly payment.

Author Ramit Sethi in “I Will Teach You To Be Rich” recommends increasing your credit score before applying for a mortgage.

Insurance rates: A low credit score is an indication of recklessness of habits and attitude.  That perceived carelessness gives the insurance company a reason to believe that you will eventually be costing them money and will be compelled to charge a higher rate.  Your insurance quote may be so high that you can’t afford it for the car you want.

Rats! Now it’s got a hold on your ride.

Ability to get hired:  Having the best skills and experience for a job may not guarantee getting hired if your credit score is low. Job competition is hard enough, but having a bad credit rating is an easy way for you to be screened out and lose the work opportunity.  Hiring companies run credit reports to judge the character of an applicant.  Regardless of the reason, a bad credit report is a poor reflection on trustworthiness and credibility and employers use the credit check to prevent theft and embezzlement.

There goes your dream job.

Wealth accumulation: As noted above in the interest rate paragraph, when you pay on a higher rate, your total lifetime payments are significantly higher than someone offered a low, competitive rate.  On a short-term level, it may seem that you’re able to enjoy your possessions to support your lifestyle, but in the long run, it limits your ability to save for retirement and accumulate wealth.

You’ll join the hordes of Americans that have less than $50,000 saved for retirement.

Your relationships:  That’s right.  A recent survey by Bankrate.com showed almost two in five U.S. adults say knowing someone’s credit score would affect their interest in dating that person.  For more insight on this, read http://www.chicagotribune.com/lifestyles/sc-credit-score-relationship-family-1220-20170120-story.html.

No one wants a partner that’s going to be a financial drain. 

Increasing Your Credit Rating

Luckily, your credit rating is a very forgiving friend.  With some TLC, you can repair the affair.   It may take time and devotion, and maybe some therapy.  Here’s the best way to avoid the effort and expense to restore a good credit tally – pay your bills on time and don’t overextend your credit.  As Dr. Phil says, “The best indicator of future behavior is past behavior.”  If you have a low credit score, start creating a new history.

 

 

 

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