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Wednesday, January 27th
It used to be that good credit only mattered if you wanted to take out a loan for a large purchase such as a house or a car. Those days are long gone.
A person's credit is now being used as a barometer for approving car insurance rates, utility services and even for purposes of employment. If you have poor credit, a lot of doors will be closed to you that just a few years ago would have remained open.
How, exactly, are credit reports being used nowadays?
Roughly 69 percent of employers polled in a nationwide study said they use an applicant's credit report as consideration for employment. Under the Fair Credit Reporting Act - which is administered by the Federal Trade Commission - employers are required to seek permission from applicants prior to running a credit check. Because employers can and do look at credit during the hiring process, it is a good idea to check your credit through the three reporting agencies (Equifax, Experian and TransUnion) at least once a year. Every person is entitled to one free credit report annually. You can request a report from all three agencies at the same time, or stagger your requests one at a time so that you receive a new report every three months. By doing so, it gives you a chance to correct any mistakes that may affect employment.
It only makes sense that a person's credit history would be considered by any credit agency. Credit cards are no exception. If you have a history of failure to repay debt, you can expect to either be turned down for a credit card, or be granted one with an extremely high interest rate.
Houses and Cars
If you plan to own your own home, or to purchase a vehicle, having good credit is essential. Mortgage lenders, as well as car loan companies, want to be assured you won't default on a loan before granting one. As with credit cards, persons with a bad credit history can either expect to be totally denied for a home or car loan - or be subjected to an incredibly high interest rate.
Most utility companies - electric, gas, water, phone and cable - will conduct a credit check prior to providing you with their service. Because most utilities are paid for a month after their actual usage, utility companies want to make sure you'll be good for the payment. And unlike a car or home, utilities can't be repossessed once they've been used. The worst that can happen if failure to make payment occurs is that the utility company will discontinue their service to you. But it may not be able to recoup what it already has lost. For that reason, utilities want to know your credit history before ever agreeing to open an account for you.
Starting a Business
If you have dreams of owning your own business, having bad credit can put a damper on them. Business start-ups generally require a large start-up cash flow. Many entrepreneurs do not have that kind of cash on hand; therefore, they find themselves in need of a business loan. Without good credit, you can kiss the possibility of obtaining a loan goodbye.
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