Most people know that their credit score directly affects their ability to borrow money. That’s very important for most families. About half the households in America cannot cover a $400 emergency expense. Therefore, most of us will need a loan at one time or another.
However, your credit score has a number of other effects as well. Knowing these effects prevents unexpected and unpleasant surprises and can also save you thousands of dollars.
Credit Card Reward Programs
Your credit score has little effect on high credit card interest. There’s not much of a difference between a good credit 17 percent APR and a so-so credit 19 percent APR. However, your credit score directly affects your eligibility for high rewards cards. Usually, the effect is the same as a much lower interest rate.
Cash back is a very popular option. Many cards offer 1 or 2 percent cash back even on routine purchases, like groceries and car payments. The incentives are often even greater for things like gasoline at preferred retailers. Other cards offer airline miles or membership discounts. IN most cases, the available perks well exceed the annual fees and shave precious dollars off your monthly expense tally.
People with credit problems not only have a harder time qualifying for loans. They usually pay higher interest rates on things like auto and mortgage loans. That’s because their risk is higher. But did you know that, with a little research, you can know approximately how much interest you should pay based on your credit score?
The statistics vary greatly by location and at different times. But assume your research reveals that a person with a 720 credit score should pay about 3.6 percent for a mortgage loan. If a lender offers 4 percent, you’ll know to keep looking. If you did not arm yourself with information, you might have jumped on the 4 percent and paid over $20,000 in additional interest.
Your FICO score is a lot like your electric bill. Everyone knows that using less electricity means a lower light bill, but it’s very hard to know just what effect running the heater all night really has. Sometimes, it’s nice to have more specific information.
Constant monitoring of your credit score yields such information. Such attention is the only way to tell just how much that one unpaid bill affects your score. So, you can make better decisions about the timing of major purchases and other financial matters.
Credit Score and the Job Market
In some jobs, mostly anything related to finance or money handling, a high credit score is a must-have and a low credit score is a serious impediment to a good job.
In other situations, a good score could be the tie-breaker between two roughly equal candidates. Rightly or wrongly, many employers view a credit score as an indication of a person’s trustworthiness. The credit score is objective and, perhaps more importantly, not illegal to use in these situations.
Keep a fairly close eye on your credit score, because this knowledge helps make many important decisions a little easier.