You probably already know that when it comes to credit scores, the higher the better. But do you really know why? Credit reports and scores contain a lot of information that people and organizations use to make important decisions about your life. Let’s look into  how your credit scores affect your life.

New Credit at Reasonable Rates

When you apply for any type of credit — from a starter credit card to a mortgage — and everything in between, the creditor is going to check your credit report and score. With a high score, you’ll be able to borrow more money at lower interest rates. That’s because creditors will trust you to make payments on time and pay the loan back in full per the agreed upon terms.

A lower credit score is a sign that you’re either very new to credit, or you have a history of late payments or other missteps. The lower your credit score, the harder it is to receive approval for new credit. Or if you are approved, the interest rates will be sky-high as creditors feel they’re taking a bigger risk by lending to you.

Where You Live

When you’re trying to rent a place to live, your potential landlord will run a background check — which almost always includes a credit check. Although they won’t necessarily see your credit score, they will see your credit report which includes your credit history. Depending on how that looks, they’ll be able to develop a general idea of what your credit score might be.

Finding a Job

Looking for a new job? Be prepared for potential employers to run a credit check. Although it can happen regardless of the position you’re seeking, it’s almost a guarantee if you’re applying for any job that has you handling money or having access to accounting, payroll or other financial records or software.

If potential employers look at your credit history and see a history of late or missed payments, or a high credit utilization, it can appear you’re facing financial challenges. They may think that if you can’t manage your own finances effectively, you won’t be able to handle the job.

Acquiring Insurance

You can’t drive a car without insurance. And you’ll pay a lot more for car insurance if you have poor credit. In fact, estimates show you may be quoted rates up to 72% higher if you have poor credit rather than good or excellent credit.

All major insurance companies do a soft pull of your credit before providing a quote. That means they’ll see your basic personal information and credit history, but not your credit score.

The insurance company or type of insurance you choose won’t affect your credit. But if you make late payments or a policy closes for non-payment, that could show up on your credit report.

Now that you have a better understanding of how credit can affect your life, you see that it’s not just a financial issue. Having poor credit can drastically limit your choices and opportunities and actually cost you money. It’s a cycle that can be hard to break, but if you’re struggling, credit counseling is a great way to take control and receive a plan to get back on track.

Learn more about building credit from scratch or repairing damaged credit.