We know having good credit is an important part of our financial lives. It helps in getting a loan from a financial institution and obtaining a credit card. Since a credit report and credit score help determine the interest rate we will be charged – good credit will insure the rate will be lower (and better) than bad credit or no credit at all. But did you know that having good credit will also help in other areas such as insurance, renting, and employment?
Some auto and home owner insurers want to predict the odds that you will file a claim – so they view what is available to them. Your credit report is one of many factors companies use to decide whether or not to grant you insurance as well as the premium amount they will charge you. This practice started in the mid-1990s when it was theorized that scores might be helpful in predicting claim losses. Some companies let you know if your credit score is a factor in determining your yearly premium – read over your annual renewal policy. Many states have a law regarding insurance companies using credit information – check out your state’s consumer tips regarding insurance credit scoring.
Rental property owners may also look at your credit report and credit score. A potential landlord wants to know about your credit history – mainly if you pay your rent and bills on time. When you complete a rental application read it carefully before signing. You may be giving permission for the landlord to obtain a copy of your credit report from a credit reporting agency. The report will then assist the landlord in making a decision whether or not to rent to you. If the landlord states they are not renting to you because of what is in your credit report they then legally have to provide you with a written notice stating all of the following:
- The decision was based partly or entirely on information in the credit report;
- the name, address, and telephone number of the credit reporting agency; and
- a statement that you have the right to obtain a free copy of the credit report from the credit reporting agency that prepared it and to dispute the accuracy or completeness of information in the credit report.
Federal law states that an employer or potential employer can obtain information about your credit with your written consent. Positions that deal with sensitive responsibilities, such as those in defense, chemical, pharmaceutical, or financial services, may be more likely to obtain credit reports on their potential hires.
So, if you are asked by an employer or potential employer to give permission for a credit report, understand that:
- They must inform you that they might use the information to make a decision related to your employment,
- the permission must be in writing and,
- they must comply with federal laws that protect applicants and employees from discrimination.
Being aware of your credit – report and score is important for more reasons than previously thought because it can impact more of your life than ever before.
Tip: If you are not hired based on financial information in a credit report, the employer must tell you — orally, in writing, or electronically. Read more about the specifics the employer must do at https://www.consumer.ftc.gov/articles/0157-employment-background-checks.