I’ve seen a lot out there about how to fix your credit score, how to stop destroying your credit score, and how to check your credit score. If everyone knows that credit scores are such a big deal, then why are people struggling with them?
Well, yes, for one they are somewhat complicated to understand. But the true reason people don’t understand their credit score is because it’s not urgent. You can completely disagree, but in reality, it’s rarely urgent for people. There are very few moments when the reality of a low credit score will actually dawn upon and hurt someone.
The scary part is that low credit score will continue to linger and hurt them.
So what does it take for someone to wake up about their credit score? When are the moments that our credit score actually matters?
The Four Times You’ll Care About Credit Scores
When you first get a credit card or cell phone
When you get your first cell phone it’s likely that you are getting a very real loan. If you want an iPhone on Verizon, Verizon is going to “loan” it to you by subsidizing part of the $700. They’re going to pay much of the cost up front, and you’ll pay the rest. You will have to pay them back for it if you don’t fulfill your contract agreement.
And they won’t trust you to fulfill your contract agreement without some credit history. If you have not credit, you won’t be able to get your first cell phone agreement by yourself.
What if you want to sign up for a credit card? It’ll be tough luck trying to get a credit balance higher than $500 for your first card. People want to see that you are trustworthy with their money, and they want some history to verify the promise that you’ll pay them back.
When you buy a car
People are unlikely to care about or even be aware of their credit score again until they want to buy a car. Suddenly, they’ll wish they had paid things on time and been paying attention to outstanding bills.
They may not get rejected for having a score in the 600s or lower, but they’ll be paying a high interest rate on that new car without having outstanding credit.
When you buy a house
Again, people will not give much thought to the existence of credit scores until their next big purchase. And that is often their first mortgage. As they prepare for putting down tens of thousands of dollars, they will finally realize that a difference in 25-50 points on their credit score can mean the difference of 10% or more buying power for a home.
Applying for a business loan
People wanting to start a business rarely connect the implications personal credit history can have on starting one. If you need upfront cash to make a new business happen, it’ll be hard to secure more than a few grand without a good score and a decent income.
Why Credit Scores Should Be On Your Mind
Credit scores are important. Rarely. It’s just that in those few times when they are important, they are REALLY important.
In between those important moments for your credit score to rock, you’ve got to pay attention to keep them great. Don’t let your credit score die on you. Pay attention and get educated.
[Featured image courtesy of Alon]