Reasons Your Credit Matters Even If You Don’t Use It
Many young adults today are forgoing credit cards altogether, as well as abandoning “the American Dream” of owning a home. They’re not alone, either, and these growing trends can be seen across all generations. So, if you have no plans for a credit card or a mortgage loan in the future, why does your credit history matter? Should you even bother with maintaining a healthy score if you’ll never actually use it?
As you can imagine by the title of this article, the answer is a resounding yes. Even if you don’t intend to use your credit score for, well, anything credit-related, you should still care about where it lies. You might be surprised to know the ways that your credit score can impact your life, even if you aren’t applying for credit anywhere.
When You Go to Sign a Lease
We all know that a mortgage is a credit-intense process, often requiring a few years of intentional moves in order to snag the loan and interest rate you want. But just because you forgo the home-buying/mortgage route doesn’t mean that your credit score won’t still influence your housing situation.
More and more, landlords, property management companies, and apartment complexes will run a potential tenant’s credit score prior to approving their application. While your score won’t be able to impact something like an interest rate, it can impact your approval altogether.
Whether you’re looking to rent a home directly from the owner or just want to switch to an apartment across town, chances are that they’ll run a credit check. And if yours shows a history of irresponsible spending, abandoned account balances, or general financial neglect, you might get denied.
When You Sign Up for Utilities
When you move into said new apartment or rental home, you’ll need to get utilities switched over to your name. This includes everything from gas and/or electric to water, cable, and even garbage disposal. But you might not know that many of these companies will want to run a credit check on your before extending service.
Some utility companies run your credit to ensure that you don’t have a history of accounts going to collections. If your credit history is shoddy, you might be denied service or required to put down a deposit. After all, utilities are just like small, short-term loans: you use the services prior to paying for them, so the company wants to ensure that you’ll pay up in the end.
When You Buy Auto Insurance
Many states (though not all) allow auto insurance providers to run your credit when offering you a policy quote. If you have bad credit or a history of financial irresponsibility, this can translate into higher premiums.
Auto insurers are not allowed to deny you a policy, or cancel an existing policy, based on your credit check results alone. However, they can raise your premiums accordingly.
When You Get a New Phone
Not long ago, you could get a new smartphone every couple of years at a discounted price, just for signing a new service contract. Nowadays, though, you are forced to fork over nearly $1,000 every time you want to upgrade… and many users just can’t afford that.
Luckily, the majority of carriers will finance your smartphone purchase, spreading payments out. It’s much easier to pay for a new phone over 24-months or more, rather than forking over the cash in full… but, of course, a credit check is usually in order. If you’re going to “borrow” $1,000 from your cell carrier, they want to ensure that you can and will pay it off.
When You Want to Plan Ahead
You may not have plans for a mortgage, credit cards, or a personal loan anytime soon. But that doesn’t mean that you won’t change your mind down the line. Or, you could be presented with a great financial opportunity, for which your credit history will be considered. When that time comes, it’s important that your credit is in good shape.
Little missteps today can follow you in the form of negative credit reports for up to seven years. That means that if you let things get bad now, you could wreck your opportunities almost a decade down the line. If you change your mind and decide to buy a home, finance a vehicle, or open a credit card account later on, your credit decisions from today could negatively impact you.
There are plenty of reasons that you might want to avoid using your credit now, and there’s absolutely nothing wrong with that. However, even if you’re not actively using your credit score to do something like get a mortgage, you should still ensure that your credit report is healthy. You never know when it might come in handy.