PGCFCU Blog

“What’s a good credit score?” is a smart question if you’re hoping to improve your financial health. Answers to this question vary. Generally, a credit score can fall anywhere between 300 and 850, with a score of 700 considered “good”. These three digits aren’t vanity metrics meant to one-up a friend or family member. Instead, they can influence your life in ways you may not have thought about before now.

Fair Isaac Corporation, the credit scoring agency that calculates FICO scores, claims that 66 percent of Americans have a “Good” FICO score or better. A good score can help secure a credit card or loan with low interest rates. But, what if you prefer to pay cash for everything or fall in with the other 34 percent of the population?

 “Cash is king!” as the saying goes. Only spending money on what you can afford is a good idea and paying cash is one way to ensure you stick to a budget. However, avoiding credit or having bad credit can limit your ability to secure credit. And, that can restrict other areas of your life.

Here are some ways lousy credit can impact your life now and in the future.

Bad Credit Can Influence Where You Live
Imagine the following scenario. You’ve found the perfect rental unit. It’s close to work, in a top-rated school district, and the crime rate is the lowest in the state. The only problem is that your new landlord ran your credit history and discovered that you broke your lease 18 months ago. You couldn’t sublease your old apartment, and you eventually paid the lease-breaking fee, but not before missed payments were reported to the credit bureaus.  Now what?

Property management companies and landlords use credit reports as part of their tenant screening process. They use that data to decide the amount of the security deposit and whether they will even rent to you. A prior eviction or a history of failing to pay your creditors as agreed may cause a rental application denial. Plan on having a credit score of 620 or higher if you hope to easily rent an apartment.

Bad Credit Can Limit Cell Phone Options
Planning on being the first in line for the next version of the iPhone or Samsung device? If you hope to enroll in a cell phone plan or contract that allows payments or lease of the device, then the service provider will run a credit check. A low credit score or bad credit can leave you with limited options like a pre-paid cellular plan. This means you have to pay for the phone and data usage up front. High out-of-pocket and up-front costs can result in settling for a cell phone with limited features or services.

Bad Credit Can Increase Insurance Costs
If you secured an auto loan to purchase your vehicle, then you know that the lender ran your credit before granting loan approval. But, did you know that your insurance carrier likely did the same thing? While auto insurance carriers don’t loan money to customers, it’s estimated that 95 percent use credit-based insurance scores to determine their risk and, subsequently, your auto insurance premium.

Paying more in up-front deposits and higher premiums are undesirable consequences and incentives to improve your credit score now. This money could instead be used to increase your retirement savings or pay off other debts. If you have bad credit, don’t despair. It takes months to improve your credit health, but it can be done. The first step is to request a copy of your credit history report from each of the credit reporting bureaus. Your credit score is figured using the data in your credit history report.

Visit AnnualCreditReport.com to obtain a free copy of each report. Follow the dispute policy for each bureau if you find errors in your reports. Establish a solid on-time payment history and keep your credit account balances low and you should begin to see your credit score increase.