Angela K. Love
Personal + Business Finance Consultant

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Why Credit Scores and Reports are Always Important

After reading the title to this article, you may be thinking one of two things, either "Of course, that's not news," or "I don't plan on getting anymore loans, so that's not true."  Many people think credit scores and reports are only relevant if they plan to get a loan someday in the future; however, that's not necessarily the case.

Many companies use an individual’s credit report and their corresponding FICO score for a variety of reasons.  For example, when applying for employment, many companies run an applicant's credit report.  I, personally, learned this the hard way in my very early 20's.  I had applied for a fast food management position and during the interview I was caught off guard when the interviewer began asking me a lot of questions about my credit report.  I didn't know anything about credit, managing a checking account, or budgeting, so that conversation was a rather difficult one at the time.  Needless to say, I didn’t get the job even though I already had several years of management experience in the fast food industry.

Other companies that use a credit report are utility and property management companies.  Utility companies typically will require a deposit for those with no credit or a credit history that shows late payments or defaults.  If a person has a good credit history, a utility company will usually waive the deposit.  A letter from a previous utility company, which states a satisfactory or excellent payment history, are sometimes accepted by utility companies to waive a deposit; however, if a credit report shows a history of issues with timely payments, the utility will typically require the deposit anyway. 

 

Property management companies and owners who manage their own rental properties will run a credit report on lease applicants.  Those credit reports don’t usually have a FICO score on them, but they do list the credit history of the applicant.  A credit report that shows a poor credit history due to slow, late, or payments in default will usually result in the applicant being denied a lease.  When a credit report has both good and poor credit history, a property management company may require a larger deposit. 

Many, if not all, financial institutions will run a credit report on anyone who would like to open a checking account.  Financial institutions look at both the FICO and credit history of an individual to determine if they qualify for a checking account.  When I worked at a financial institution, I had to turn people down for a checking account from time to time due to poor credit history.

Additionally, many employers prefer to pay employees by using direct deposit.  Using direct deposit is more efficient and allows employees to have access to their pay on payday instead of having to get their paycheck to the bank.  Financial institutions offer several products, other than loans, that require a good credit history.  Having a checking account makes the entire payroll process easier for everyone when direct deposit is used.

Credit reports tell a lot about a person’s character to others such as potential employers, landlords, utility companies, and financial institutions.  No credit isn’t the same great credit.  No credit tells others that a person hasn’t demonstrated if they have the willingness to pay the debt that they have incurred.  Debt can range from a credit card bill to a cell phone bill.  The reality is that most people will need some sort of credit extended to them at some point in their lives, whether it’s a loan, a cell phone bill, or utilities.  This doesn’t mean I’ve advocating that everyone takes on debt; I’m not.  I am advocating that everyone should take care of their credit history, because you never know when a good credit history will be of benefit to you.