5 Ways Your Credit Score Affects Your Life
Credit scores and how they work can confuse even the most diligent budgeters. Many people don’t know what their credit score is until their credit card application is denied or they go take out a loan. Credit monitoring is a great tool for people to keep an eye on their financial health. Even if you’re not looking to make a major purchase anytime soon, your credit score can still play an important role in your life.
What are Credit Scores?
Simply put, credit scores are numbers associated with how well you manage credit and loans. Credit scores range between 300-850 and give financial institutions an idea of someone’s creditworthiness. Banks, credit card companies and other groups will look at a person’s score to determine the likelihood of an applicant paying their bills on time.
A variety of factors influence your credit score, including missed payments, your credit utilization, how long you’ve opened lines of credit, and how frequently you apply for credit cards. Using credit monitoring tools can give insights into how those factors impact your score.
The benefits of having good credit go beyond debt management. Here are a few ways your credit score affects your life.
Qualifying for a House is Rooted in Your Credit Score.
Homeownership can feel like a lofty goal for anyone but can be particularly daunting for younger millennials and Gen Z. Your credit score directly affects whether or not you qualify for a mortgage. Even if you qualify, your score also determines what your interest rates look like and what your down payment will have to be on the property. If you’re married, they’ll also include your partner’s credit score in those calculations.
Credit Scores Determine Which Types of Credit Cards You Can Get.
Have you ever wanted a specialty credit card like those with travel perks or fantastic cash-back rates? Your credit score will affect which ones you’re approved for. Credit card companies want assurance that you know how to manage and properly use multiple lines of credit. They typically reserve their premium cards for people with good-excellent scores. The better your score, the easier it becomes to get approved for a card with those incredible perks.
Landlords and Property Managers are Interested in Your Credit Score.
You’re looking for a new apartment, and your potential landlord is looking for a reliable tenant. Property managers often run soft credit checks early on in the application process to ensure that they’ll likely get their rent payments each month. While a lower score won’t necessarily disqualify you from renting, it can negatively affect your chances of approval. In many cases, property managers allow applicants with lower credit scores to have a guarantor to give managers assurance rent will be paid.
Credit Monitoring Can Affect Insurance Premiums.
In several states, insurance companies use a credit-based score to help determine what your premiums will be. These aren’t the same as your consumer credit score, but they are based on your credit history. By monitoring your credit and paying bills on time, you can qualify for lower premiums over time.
They Impact Refinancing Loans.
Refinancing a loan is a great way to lower your monthly payments. Your creditworthiness impacts what rates and loans lenders offer when you refinance your student loan, auto loan or mortgage. The better your credit score, the more likely you are to get a low-rate loan and reap the benefits of refinancing.
At AutoPayPlus, our goal is to make budgeting payments easier for our members. We love seeing users pay off loans faster, improve their credit scores, and find freedom from debt. Our team knows firsthand how critical a healthy credit score is to financial freedom. That’s why we’ve partnered with TransUnion® to provide members with their first 12 months of free credit monitoring, monthly credit score updates, quarterly credit snapshots, and two annual credit reports. Understanding your credit health can be a great way to start your financial journey. To learn more about how AutoPayPlus helps members budget better, visit our website.