Whether you realize it or not, your credit score plays an important role in your life. But what is credit? Simply put, credit is your ability to borrow money or get access to goods and services. But there’s more to it than that. Here are some things you may not have known about credit.
Good Credit Makes Your Life Easier
Having a good credit score makes it easier to get a:
- Job – 47% of employers check credit reports
The better your score, the easier it is to borrow money with lower rates – which saves you money.
But good credit makes your life easier in other ways. It helps you:
- Get a better car insurance rate. Consumer Reports says that people with bad credit pay $1,301 more for car insurance each year compared to people with good credit.
- Access better credit card rewards. The best rewards are only available to people with excellent credit.
- Skip security deposits. Utility and cell phone companies ask for security deposits if you have bad or fair credit. If you have good credit, you can save $100-$200 by skipping this step.
- Negotiate better car prices. If you can get pre-qualified for an auto loan, you can negotiate with the dealership the same way as someone with cash. The dealership knows that if they don’t play ball, you can take your business elsewhere.
Rent and Bills Don’t Affect Your Score
You may assume that paying your rent and bills on time will help you build credit. But most bills and rent payments aren’t reported to credit bureaus.
It doesn’t matter that you’ve paid your rent on time for years. Unless you use a rent reporting service, like Rental Kharma or Experian RentBureau, your on-time payments won’t count towards your credit.
Bad Credit Isn’t Permanent
Nothing lasts forever – not even bad credit. Most of the bad stuff on your credit report only stays there for seven years. A few things stay on there a little longer.
- Hard inquiries: 2 years
- Delinquencies: 7 years
- Charge-offs: 7 years
- Student loan defaults: 7 years
- Foreclosure: 7 years
- Judgments: 7 years
- Bankruptcy: 7-10 years
Even if you have some bruises on your credit report, they won’t be there indefinitely – even if you do nothing to fix it.
Bad Credit Means Needing a Co-Signer
Many people don’t realize that bad credit makes it hard to borrow money on your own. A higher interest rate may not be enough to satisfy the lender. Many will want you to find a co-signer. This means that someone else is pledging to cover the loan if you can’t.
If you have good credit, you have freedom. You can borrow money and take out credit cards without someone else’s help.