It seems everyone today wants to improve their FICO score or credit score. I can understand why it is such a hot topic. Your credit score effects many areas of a person’s life today. In the past it just meant that you approved or not approved for a loan and the rate if approved.
Today, a good or bad FICO score can help or hurt you in many areas.
1. Job – Most employers now review a job applicants credit report as part of the application. I’ve heard people say that’s discriminating against people with poor credit. Well your credit score is something everyone is in charge of regardless of race, education, or religion. I’ve met people who didn’t graduate from high school, but still had a high score.
2. Renting an Apartment – Landlords now charge a premium if a tenant has a low FICO score. Why? Landlords believe that there could be a higher probability that they would have to evict someone with low FICO score.
3. Car Insurance – People now have a credit score for debt and an insurance score for insurance. Car insurance companies now review your credit history to determine your rate. I’ve heard people with a good driving record, but a poor credit score actually pays more even with a good driving record. When a car insurance company review your credit history these inquiries are considered “soft hits” meaning they don’t effect your FICO score.
4. Credit Card Offers – Your neighbors may constantly receive 0% offers, but you are receiving offers for 14.99%. Why? Once again credit card companies regularly review credit reports to see what rate you may qualify to receive. This are also “soft hits.”
5. Car Loans – I’m sure you’ve heard the ad. “Do you have a job? Do you have $199? Then you can buy a new car.” Well not necessarily. You may be approved for a loan, but the rate and terms will probably suck. I’ve seen rates at 21.99% and the length of the loan at 5 or 6 years just to keep the payment affordable. If this is you or someone you know then you shouldn’t not buy a new car.
As you can see why improving your FICO score is such a hot topic today. It can help or hurt in more than one way. Take the time to find out your credit score and see what you can do to improve your score before your next major purchase.