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Five Reasons you Should Care About your Credit (FICO) Score

Written by Nickel - 21 Comments

Unless you live in a cave (and maybe even then), you know that your credit score is incredibly important when it comes to securing credit. But did you know that it’s also used for much more than that? What follows is a list of five other areas of your life that can potentially be impacted by your credit score…

1. Renting property – Many (if not most) landlords now run credit checks on prospective tenants. Think about it… They’re essentially giving you a credit line when you sign a year long lease, but are allowed to pay it off in monthly installments. In many cases, bad credit = no apartment (or house, or whatever).

2. Cell phones – Cell phone companies typically check your credit before signing you up for service. Here again, they’re essentially extending you a credit line and they want to be sure you’re good for the money. Not only are they concerned that you might rack up a bunch of airtime charges and be unable to pay for them, but they’re also letting you walk out the door with a shiny new handset at a (sometimes steep) discount. They want to be sure that you’re good for the standard monthly charges. Crappy credit might result in you being shunted over to a pay-as-you-go plan, and the hardware deals might not be as good.

3. Future credit card agreement changes – It’s not uncommon for credit issuer to run routine credit checks (so-called ’soft pulls’, which don’t show up as credit inquiries on your credit report) on existing customers. If your credit score takes a nosedive, you represent a bigger risk, and they might change the terms of your agreement (e.g., increase your interest rate) to reflect that.

4. Car insurance – Car insurance issuers are increasingly looking at credit scores as a way to gauge risk. If you’re reckless in one area of your life, you might not be a good bet in other areas. This can result in higher premiums, or they might simply decide not to cover you.

5. Employment opportunities – I’ve never experienced this one first hand, but I’ve heard that it’s increasingly common for employers to include a credit check when looking into the background of prospective employees. In short, they’re looking to see if you’re responsible. Credit reports also provide an employment history. Of course, they can only do this with your permission, so hopefully you read all of that paperwork that they give you when you apply before signing anything. Then again, if you decline they’ll more than likely show you the door.

If you want to check your FICO score, you can use this myFICO discount code to save 20%, or you can get a free credit score from Credit Karma.

Published on June 28th, 2007
Modified on July 21st, 2014 - 21 Comments
Filed under: Credit Cards, Insurance, Working

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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21 Responses to “Five Reasons you Should Care About your Credit (FICO) Score”

  1. 1
    Tyler Says:

    I disagree with the whole notion of a FICO score. You don’t need a FICO for anything! You don’t NEED to rent, you don’t NEED to have a cell phone. If a mobile company checks your FICO, go to a different carrier. Potential job? Find a different one if they place that much emphasis on credit. You don’t need a FICO for a mortgage. You don’t need a FICO for car insurance. Having a high credit score may be nice, but it’s certainly not needed. I never took out a loan, had a credit card, nothing! I basically had a credit score of ZERO! But I bought a house, I have a cell, insurance, good-paying job, and have rented in the past. I think everyone needs to realize that life is not about CREDIT!

  2. 2
    Karen Says:

    Everytime I hear Dave Ramsey tell people his credit score is “0″ and it’s nothing more than an “I love debt” score, I shudder. Then he goes on to say you don’t need one. And everytime he does that I think of the reasons you listed. It may not be a NEED, but it can be helpful. Credit, in and of itself, is not evil. It’s how you use it. Responsible use raises your credit score. It’s allowing yourself to get out of control and spend more than you have that decreases it.

    In response to Tyler…You don’t NEED to have a FICO score to GET insurance, but rates are determined by your FICO score (higher the FICO, lower the insurance rate)

  3. 3
    Keith Says:

    I have some first hand experience with most of those, I’ll just expound on 2 of them.

    All cell phone companies check your credit, I was a cell phone salesman and I checked many a credit for people. The ones with poor credit ALWAYS have to pay a deposit, bad credit = deposit to cover ourselves. However, plans are no different as well as deals on phones, it’s just the deposit we’re after.

    My current employer did a credit AND background check on me before I was offered a job. Of course because I’m in a financial planning firm they do this because they feel people with bad credit shouldn’t be giving out financial advice – I agree 100%, thank god I wasn’t floating any 0% balance transfers :D

  4. 4
    Tyler Says:

    Karen: I never give my SSN to anyone, esp my insurance company. They have no way to check my credit score w/o it. My rates are very reasonable.

    Keith: My cell company did not require my SSN so they couldn’t have checked my FICO. I do know some jobs do check, but I’m not in that situation.

  5. 5
    Chris Says:

    You need a good FICO score with other companies as well. Particularly utilities, they will run your credit and if you have a poor score they may (and probably will) force you to give them upfront deposits before activating your service.

  6. 6
    kitty Says:

    I used to rent out my old condo, and I was certainly interested in my perspective tenants’ credit score. And I had a very very nice condo to rent in probably the most thought after complex in the area (especially since so few of them were rented out). As to social security – any landlord who doesn’t ask for it is a fool. Some people are very nice (my tenants were), but occasionally you get people who don’t pay or ruin your property (happened with people I know). You have to be able to go after them in any way possible including ruining their credit score.

    Sorry tyler, maybe some places would rent you without a credit score, but you surely have a lot less choices. In places where there are not that many good rental properties it may make a lot of difference.

  7. 7
    kitty Says:

    Just want to add something. This thread is possibly already dead, but just in case it is not… This is something I just found out after talking with my friend.

    It turns out you cannot even open an internet saving account (for example with FNBO direct) without a credit score.

    This friend of mine – who has excellent credit, plenty of money, and whose only debt is mortgage – just got re-married and changed her name. This fact is not yet reflected on her credit score as she found out when she wanted to switch to a different credit card with a higher cash back – they told her her name doesn’t match her SSN. At least this company told her the problem so that she was able to resolve it by sending in the copy of her marriage certificate, but it turned out to be not that easy with FNBO direct. When she tried to open a saving account on FNBO direct, they denied her because her credit check returned 0. She called FNBO and tried to settle that, but they say they cannot do anything and essentially don’t care why her credit check returned such a low number. This is not a big deal as a local bank here has a promotional rate of 5.5% for 10 month and she can bring her marriage certificate there, so she’ll just put her money there, but this experience illustrates that having a good credit score is important.

    By the way, she wanted to contact TransUnion – apparently this is the company FNBO direct is using for the credit score, and found it rather difficult. So now she has to wait until the information about her new name will get updated with credit history under her new name.

  8. 8
    mikeb Says:

    My company checks our credit during a background check as required by the US government. They want to make sure we won’t be able to be easily blackmailed or bribed in to doing bad things that would affect the government infrastructure.

  9. 9
    minimum wage Says:

    1. So if someone can come up with all the rent money up front (six and twelve month leases are common here, six months might be possible to come up with up front), they can get out of a credit check? Oh, and if they’re paying it all up front, do they get a discount for early payment?

    2. I have an excellent driving record and was paying very low insurance rates until I got sick, relocated, and sold my car. When I got sick, I weas unable to work for a year and without income, I couldn’t pay my bills and my credit went in the tank, and I ended up with two derogs that won’t go away until resolved, but I can’t resolve them on my minimum wage income. Did I rapidly go from being a low-risk driver to being a high-risk driver? Since I can’t get my credit score up to average on my income, does that make me a high-risk driver indefinitely?

    3. Since my credit is in the tank, how am I supposed to get a job that pays enough to get my credit out of the tank? Sounds like a catch-22.

    4. My bad credit resulted from 1) student loans followed by a minimum wage income – couldn’t pay it off fast, couldn’t save up any money, couldn’t afford things like health insurance. 2) lack of insurance led to untreated health issues, leading ultimately to the health collapse mentioned above, which also collapsed my credit.

    Did I mismanage my money? How do my credit problems make me ineligible to work for a financial planning firm? Did I spend frivolously or excessively?

  10. 10
    nickel Says:

    minimum wage:

    1. Have you asked your prospective landlord? Or are you just assuming the worst?

    2. Nope, but insurance companies don’t deal with individuals. They deal with categories of risk. As it turns out, people with low credit scores (on average) are riskier drivers. This doesn’t mean everyone is, but…

    3. You should probably talk to your prospective employer about this. Or is this another hypothetical? Also keep in mind that this isn’t a hard and fast rule – not all employers check credit, although I would imagine that as you move up the totem pole it becomes more likely.

  11. 11
    Minimum Wage Says:

    1. I’m just assuming the worst. I found a good deal several years ago from a retired pastor. Unfortunately, he and his wife sold the property and moved to the coast. Fortunately, my new landlord appears to be one of those buy-and-hold types and so far there has been no sign of a sale on the horizon (which would give the buyer an increased cost structure forcing a substantial rent increase). So maybe I’m paranoid but as a renter I understand the property could be sold out from under me and I could be left with little recourse but to scramble and pay a lot more. (Local rents are projected to rise 8.5 percent this year and an additional 6 percent next year, so I have good reason to be paranoid.)

    2. So it looks like I might never again ber able to afford car insurance. Oh well, uninsured drivers are common around here.

    3. I work in retail (I’d escape if I could, but with no marketable skills I might be stuck for the rest of my life) and credit checks are standard around here for any sort of retail job with advancement potential (no advancement path where I work).

    It looks like I might just have to accept being poor the rest of my life.

  12. 12
    nickel Says:

    Just out of curiosity… You say that you have student loans, and you also say that you have no marketable skills. Did you not finish your schooling? Or did you just make a poor choice when it came to selecting a field of study?

  13. 13
    minimum wage Says:

    I completed an undergraduate degree (liberal arts with a minor in comp sci) but couldn’t afford to go on to law school as I had intended. I graduated in a depressed Rust Belt economy at the bottom of a recession; two-thirds of new graduates were leaving the state to find jobs elsewhere. The PC rendered my mainframe skills outdated and obsolete; without IT job experience, I couldn’t even get Y2K work even though employers and headhunters were clamoring for workers.

    So now I have no marketable skills, no career-related experience, a pile of student loan debt, and no hope for a better future.

  14. 14
    kitty Says:

    Minimum wage, have you ever considered getting an M.S. in CS? It’s free with an assistantship and teaching assistantships are easy to get. Most big CS departments offer teaching or research assistantships so you get a) tuition/fees waiver as “a member of academic or graduate stuff” and b) a salary which while not big is considerably higher than minimum wage,even though with an average 50% assistantship you work on average 20 hours per week. You are paid for the whole month in winter in which teaching assistants are not working. When I was a TA, my salary was twice as much as the cost of a single room in a graduate dorm and food service with the university (which many considered too expensive, so you may be able to rent a cheap apartment on campus and cook and still have enough money). After the first year as a teaching assistant I saved enough for a trip to Hawaii (cheap package, but still..)

    In big universities teaching assistantships are easy to get. Computer Science departments in big universities always need teaching assistants. Some universities also have special programs for those without BS in CS. I know for sure that, for example, University of Illinois at Urbana-Champaign as well as Princeton both have such a program. Both have very good CS departments. And with assistantship you couldn’t care less how expensive the university is – you get a tuition waiver.

    Even with outsourcing people with graduate degrees in CS from good schools are finding jobs. You can work for a couple of years as a software engineer, and save money for law school. It may be not what you dreamed about, but it beats working for a minimum wage.

  15. 15
    kitty Says:

    Couple of other things. Depending on the type of student loans you have, you may get a break if you go to grad school. In my time, state guaranteed loans deferred payments (and paid interest for you) while you are in grad school. Even if yours is not one of those, you can send payments from assistantship as you can from minimum wage.
    Also, when I said 20 hours, I included your preparation time, grading, learning if you need to catch up with the material yourself. The real hours are maybe a couple of hours a week office hours and four hours or so teaching. Sometimes you get graders to help you grade. Sometimes you can do your own coursework during office hours. So it is a much more pleasant work than what you do now and you’ll earn no less money.

  16. 16
    CAcyclist Says:

    On the topic of insurance, for those in California: it’s my understanding that credit scores may not be used in setting premiums, at least for auto and home policies. From the information I can find, this is California law (since 1988, with the passage of Proposition 103); other states’ rules may vary.

    Not that I’m against having a good credit score! (Just offering the above for the sake of completeness…)

  17. 17
    creditnine.com Says:

    Yeah its super important, especially if you want a mortgage

  18. 18
    H Lee D Says:

    Having a good credit score has enabled me to avoid deposits on many accounts, mainly utilities when I’ve moved. This was particularly helpful when paying a collective $400-500 in security deposits would have been a hardship.

  19. 19
    livingalmostlarge Says:

    DH has had his credit run on all his job interviews.

  20. 20
    Dave Says:

    Your credit report and credit score are very important.

    The interest rate for mortgages and car loans is
    determined by this.

    Try to keep your credit lines up and keep your
    credit balances as close to zero as possible.

  21. 21
    aaron Says:

    My comment is for kitty:
    You CAN get an online savings account WITHOUT a credit score!!!! I have one. Im debt free and CREDIT free and LUVIN IT!!!!!!!!!!

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