credit scores impactYou may have heard that credit scores are important, as you’ve likely heard that you should avoid bad or nonexistent scores, but do you actually know how your credit scores impact your life? To help you get a complete picture, we’re covering the different areas your credit scores can positively or negatively affect, depending on how yours are faring. Keep reading to learn about the five ways your credit scores impact your life.

Why do credit scores matter?

Before getting into what credit scores can impact, it’s helpful to first have a firm grasp on what credit scores are. We’ve dug into this topic in previous posts, but here’s a quick rundown: credit scores are essentially grades of your credit reports, which are records of your credit history showing how you’ve handled credit and loans (e.g., bill payments, debt, account history and more). Since credit scores act as evaluations of your creditworthiness and how well you manage your finances, many creditors and lenders look to these scores to judge how financially responsible you are, using them to determine if they’ll be extending an offer to you or not. For that reason, your credit scores or lack thereof can impact the following areas.

4 aspects of your life that are influenced by credit scores

Credit cards, loans and interest rates

Most people already know this, but your credit scores are one of the many factors that determine whether or not you get approved for a credit card or loans. Additionally, your credit scores also determine what your card’s or loan’s interest rates will be. Your credit scores can also help decide what your credit card’s limit or total loan amount is, along with the terms of your loan. You should be aware that other factors, like your current debts and income, also play a role in deciding the account’s limit or terms.

Your personal credit scores’ impacts on your loan approvals don’t just pertain to personal loan approvals; they can apply to loans for your small business under certain circumstances as well. While there are business credit scores, which are essentially credit scores for your business, it’s not unheard of for these small businesses to lack a business credit history. If that’s the case, a lender will look at the owner’s personal credit scores when deciding whether or not they’ll be approved and the terms of the loan.

Where you live

Whether you’re looking for your first apartment, buying your third house or moving into a retirement community, your credit scores will play some role. That’s because landlords often request a credit check to make sure potential tenants have a reliable repayment track record. The same goes for retirement communities. If you’re a homeowner, your mortgage lender already completed a credit check during the application and underwriting processes. This credit check, along with a number of other factors, are used to decide how much your mortgage will be, if you’re approved, what your interest rate will be and more.

Your love life

Credit scores can also be significant when it comes to predicting a relationship’s trajectory, as a study by the Federal Reserve Board has shown that credit scores correlate with how well your love life goes. That’s not the only study showing a correlation between a couple’s compatibility and their credit scores, as our friends at Bankrate found that 42% of Americans indicate that knowing someone’s credit score could be the deciding factor of whether or not they’ll date that person. Long story short, your credit woes have an impact on your love life.

Access to services

Last but not least, it’s also possible for your credit scores to impact your access to different services, like utilities (e.g., gas, water or electricity) or top cell phone offers. Utility companies usually look to your credit scores or credit history or both to determine if you can open an account, depending on the company. If your credit scores aren’t high enough or your credit history isn’t long enough, you may have to pay a deposit, an amount that some utility companies determine based on your scores. Your credit scores can also impact your cell phone prices, as noted by T-Mobile, since some carriers determine who gets access to their best offers by looking at their prospective clients’ credit scores.

How can you improve your credit scores?

Credit scores have a huge impact on your life, so it’s good to know where your credit scores sit and how you can improve. One of the first steps is to check your credit scores, as you can’t work on building them if you don’t have a starting point. Next, check your credit reports to determine what factors may be lowering your scores. Once you do that, you can work on improving whatever culprit — identity theft, credit reporting errors, late payments, no credit history or something else — is dinging your credit. After you’ve sorted out the issue on your credit reports (e.g., you paid off the outstanding debt or reported any fraudulent accounts), you should look to the future. Start by using your current credit cards responsibly, meaning you pay your bill on time, you only make purchases that you know you can afford to pay off and you avoid canceling your old accounts. After you start to see a bump in your credit scores, you can even try applying for a new credit card with better rewards and perks.

Credit scores impact your life in immense ways, so it’s important to make sure your credit scores are as high as they can be. Now that you know more about how credit scores affect different areas of your life, learn more about what you need to do to maintain good credit health. Follow our credit monitoring blog for more information.