Do you know what your FICO credit score?
If you’re employed, your employer probably knows. In fact, if you are working, living in an apartment, using a cell phone, or insuring your car, house, apartment, etc… all those companies have checked your score.
If you’re wondering why they’re checking your score, you aren’t alone. A lot of people are asking these questions, especially with unemployment up and incomes down. Unfortunately, companies are also in a similarly difficult financial position and many are turning to credit scores to find an edge.
Here’s why companies use your credit score and credit history:
- Employers: Whether it’s right or wrong, employers believe that financial health is a good determinant of whether a potential employee will steal. Reviewing a credit history has become standard in background investigations, especially if they are security related, because someone in difficult financial shape may be tempted by bribes. While bankruptcy can’t be a factor in a hiring decision, everything else in the history is fair game.
- Insurance companies: It’s unclear why insurance companies use credit in their decisions but the fact they do is very clear. The lower your credit score, the higher your premiums will be. For whatever reason, their actuaries have determined that lower scores mean more claims.
- Landlords: Landlords have been checking credit scores and histories since the beginning of time because they’re essentially “lending” you the value of rent each month. If you’re unable to regularly meet other obligations, you might not be able to make rent and that’s a problem. This same logic applies to service contracts, like cable or cell phone service.
While you don’t necessary need to know your credit score, it’s important that you review your credit history so that your score is as accurate as possible. It’s being used in places you probably didn’t expect and in places it was never intended for. Keep your nose clean.
This is a guest article by Jim, who writes about personal finance at Bargaineering.com.