Who checks your credit report, and why? Think of your credit score as your financial report card. Many lenders such as banks use your credit score as a standardized way to determine how much credit they can trust you to pay back, in full and on time. It is important to be aware of what is on your credit report and take steps to keep your score as high as possible, because it is evaluated by all of the following businesses and more:
1. Lenders. The way lenders make money is by choosing borrowers who are able to repay their loans. That’s why they check your credit history and score before approving your loan. The score tells them what they need to know about you: whether you have a history of repaying loans on time; and whether you have defaulted on loans in the past.
2. Credit card companies. Credit card companies want to sign up new customers, but only those who will be responsible with their credit cards. Realize, too, that every time you get a new credit card, you will automatically get a credit inquiry, and these affect your score.
3. Landlords. Landlords want to make sure that they are renting to dependable tenants, and a solid credit history shows a measure of responsibility and maturity.
4. Utility companies. Utility companies have public and private investors to answer to, so it’s important for them to sign up customers who can pay their bills. A low credit score may mean that you will need a cosigner or a deposit to get your electricity or water turned on.
5. Employers. Perhaps scariest of all, more employers than ever have resorted to checking the credit scores of potential new hires. This can be a catch-22; lenders don’t want to lend to you because you don’t have a consistent work history, but changing that can be hard when employers want applicants to have strong credit histories. The best option is to keep a close eye on your credit report and keep debts paid down.
It’s recommended to make a personal budget, when sorting out your financial circumstances.