Your credit indicates your likelihood to repay your bills. If you have good credit, that indicates you’re likely to pay bills. Businesses are more willing to lend money and provide services to consumers that have good credit. On the other hand, bad credit shows that you’ve had trouble making timely payments in the past. You’ll have trouble getting new credit cards, loans, and other services when you have bad credit because businesses see you as a risk.
Most people only think associated credit with credit cards and loans. Indeed, these are two popular products that depend on credit. Your credit is used to approve your credit card and loan applications. Not only that, your credit will help determine what kind of interest rate you pay. You’re more likely to get a low interest rate when you have good credit, but a high interest rate when you have bad credit.
Your credit will have an impact on where you live and what you drive. If you have bad credit, you may have trouble getting a home loan, or even an apartment. Similarly, bad credit can keep you from getting a car or may force you to get a less reliable car from a “buy here, pay here” dealer. In both cases, credit influences your monthly payment. The better your credit, the lower your monthly payment will typically be.
Other businesses rely on your credit. Insurance companies increasingly use credit as a way to decide what rate they should charge you. They contend that consumers with bad credit are more likely to file an insurance claim and typically charge higher rates to people with bad credit.
Landlords use credit when deciding whether or not to approve a rental application. Some service providers, like cell phone companies and utility companies, use credit to decide whether to charge a security deposit. Even some employers check credit history as part of the application process.
As you can tell, credit has a significant impact on the price you pay for your credit cards, loans, and other services. Good credit is preferable because you’ll pay a lower price for certain services than someone with bad credit who uses the exact same services.