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As you are probably aware, your credit scores are pretty important. Most people have learned either the easy way or the hard way that the fateful 3-digit numbers that make up a credit score can affect some major life milestones — buying or leasing a car, financing for a new home, and your credit limits and interest rates on your credit cards themselves.
But your credit scores can also affect things that, while not any less important in your life, might slip under the radar a bit more.
1. Cell Phones
Over the last few years, cell phones have become more of a necessity than a luxury for many due to the fact that they can be used to work, pay bills, manage events and more. Being that more people than ever before are using their phones to help with other areas of their lives, the last thing you would want is to have your credit scores affect purchasing a new phone.
Cell phone providers will run a credit check to see if you can make the obligation to your monthly payment, and based on what they find, it can affect the dollar amount of your monthly payment, require a down payment deposit before the financing plan, or even disqualify you from being able to finance at all.
Let's say you are planning to rent a Bloomington apartment, the landlord will run a credit check as part of the rental application process. While this should come as no surprise, what may surprise you is that it can affect your utilities cost as well. You may have to put down more for a security deposit up front if they find that you have negative marks on your credit reports for delinquent payment elsewhere, or if you don’t have enough credit history yet, and it may even increase the cost of the utilities themselves or deny you services.
When trying to find an apartment, having to worry about paying your first month's rent and an inflated security deposit ahead of time burns a hole in your bank account before you’ve even gotten a chance to move in, and could put you in a tight spot of playing catch-up if you need furniture and other things that come with moving into a new living situation.
If you are looking for a new job or career, your credit history could be getting in the way of a new opportunity for your future. Some states have laws that limit potential employers from doing credit checks, but states that do can get a check done called an employment screening, and if they see that you have had some delinquencies, it could prevent you from getting the job over someone else applying for the same position. You may be wondering how your personal finances can affect a job you don’t even have yet, but a potential employer can look at it in a number of ways. If you are dealing with financial stresses at home, it could affect your performance at work. If you have trouble managing finances or a budget at home, how would that same potential employee handle balancing the workload at a new job? If the job you are applying for is in a department that deals with money or the company is in a financial field, the employer could see this as a serious consideration to make.
You may already be a homeowner and have been diligently paying down your mortgage since you bought your house. But if the opportunity to refinance comes up because interest rates are going down, your credit scores could get in the way of saving a lot of money over time. Not only will your refinancing options be limited, but if you think of the difference a lower interest rate would make over the course of years against your current mortgage and interest rate, you could be talking about thousands of dollars saved by refinancing completely lost due to your credit scores. Home loans aren't the only loans that could be affected by this, as refinancing your student loans can save you money as well, so you want to be able to increase your options to save money by having better credit scores.
Believe it or not, your credit scores and financial history can actually impact your love life as well. Now, potential future partners aren’t going to have access to your credit information themselves, but recent studies have shown that financial responsibility is a growing factor for people evaluating their potential love interests. It should come as no surprise as financial decisions big and small have to be made together in a long-term relationship, and in the unfortunate circumstance of divorce, it can impact the credit scores of both parties. Though the divorce itself has no effect on your scores, the fact that the divorcing couple could have joint accounts, co-signed loans, and shared assets could cause a myriad of financial complications and lasting effects for both soon to be ex-spouses. It’s not completely hopeless, though — a potential partner knowing how you are planning on handling your financial situation and your attitude about turning it around could be seen as a good thing.
Turning the Ship Around
The problem with credit issues is that they can be cyclical — if your payments go up because of past credit mistakes and it makes money tighter going forward, you run the risk of making similar mistakes in the future, so it is best to make an action plan to get your finances in order and turn your credit scores around, and build healthy credit scores in the years to come. It takes seven years for most negative marks to fall off your credit reports once they're added, but there are ways you can build your credit back up with credit cards and even open your eligibility for getting future credit cards with better rewards.
65% of the criteria FICO uses to calculate their most popular scores are from your payment history and your amounts owed, which are two areas that you can take the most immediate action in improving, so no matter what your credit situation, you can work towards turning things around for the better and take back control of your financial situation into the future while improving your credit score.