Our reviewers evaluate products and services based on unbiased research. Top Consumer Reviews may earn money when you click on a link. Learn more about our process.
Sunday, September 26th
A consumer's credit history is the barometer for their financial health.
There was a time when good credit was only important in securing a loan for a large purchase, such as a house. Nowadays, a person's credit history affects every aspect of their life, from jobs to rates on car insurance. Consumers with poor credit will have a lot of doors closed to them.
There are three major credit reporting agencies in the United States: Equifax, Experian and TransUnion. Each agency compiles a credit report on consumers based on their financial histories. Financial histories include bank accounts, credit card accounts, auto loans and even bankruptcies and foreclosures. Any time a consumer has taken out credit, it is included in their report.
Credit reporting agencies use that information to assign a credit score to consumers. The score is ascertained through calculating a mathematical algorithm, which extracts data from the report to generate a three-digit number. Scores can range from 300 to 850. Consumers who have a credit score of over 700 are considered financially stable and desirable individuals with whom to conduct business. Individuals with scores under 500 generally do not secure new loans or credit, and can be subjected to much higher interest rates than their financially-stable counterparts.
There are many reasons why a good credit score is helpful.
In addition to resumes and interviews, employers also have begun to give credence to potential hires' credit histories. In a recent nationwide survey, 69 percent of employers admitted to using an applicant's credit report as part of the hiring process. The Fair Credit Reporting Act requires any employer who wishes to view a potential employee's credit report to first seek permission from the person. Persons with higher credit scores are seen as more honest, hardworking employees and employers will lean toward hiring someone with an excellent credit score over someone with a poor one.
Credit card companies also use a consumer's credit score to determine whether they wish to extend credit to that individual. Consumers who have excellent reports can expect to receive unsolicited offers from credit card companies quite frequently. Credit card companies want to do business with those who are financial stable, offering lower interest rates and other incentives to encourage them to open accounts.
Mortgage lenders also tend to provide better interest rates and loan terms for those with a good credit score. When applying for a mortgage, most brokers prefer consumers whose credit score is at 700 or higher. These are borrowers who have solid financial lending histories and are seen as very low risk for defaulting on a mortgage. Those with scores under 700 can find themselves subject to higher interest rates, which in turn results in larger monthly payments.
Utility companies also determine whether to provide service based on a person's credit score. Most utilities are paid for after they have been used by the consumer, making this a very risky venture for the utility company if a person has bad credit. Utilities have little recourse other than stopping service if a person fails to pay for the gas, electricity, water, phone or cable services they already have used. If a consumer has a bad credit score, it can affect whether a utility company chooses to provide service. TopConsumerReviews.com has reviewed and ranked the best credit repair services available today.
Select any 2 Canadian Credit Monitoring Companies to compare them head to head