Why Your FICO Score is Important

You know by now that your credit score is a rather important number. It takes your entire financial history and condenses it down into one number. (Read about how your FICO score is figured.) And this is the number that determines whether or not you get a loan, and if you do, what your interest rate will be. This can add up to a difference of thousands of dollars--even tens of thousands of dollars in the case of a mortgage--over the the life of the loan. But loans aren't the only things that a FICO score is used for.

Employers. When you apply for a job, your employer might run a credit check. This is especially true if you are looking for a job in a security profession. A low score could indicate that you need money, and that you may be susceptible to bribes or to embezzling.

Landlords. Landlords want to know whether or not you are likely to pay your rent on time, and whether or not you will skip on the bill. Even if you do get into a rental property with poor credit, the landlord may charge you a higher security deposit based on your poor credit.

Insurance. Even when you go for car insurance or home insurance, your credit score matters. Many companies offer special discounts if you have good credit, or charge you higher premiums if you have poor credit.

You can see how your FICO score influences more parts of your life that may not be directly relates to personal finance. But no matter what you are doing, a poor credit score leads to paying more money.


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