What Are Credit Scores Used For?

October 09, 2015 / 435

 

You’ve probably already heard that a credit score is very important to a person’s financial life. In fact, if you’re on our site, you probably already know that you need to improve your credit score. Most of the time, you might assume that credit scores are just used to get approved for a loan, but this isn’t the case. There are many other reasons why credit scores can get pulled. Here are some of the ways people and businesses use credit scores, and what you should know.

 

Credit Scores Are Typically Used As A Measure Of Trustworthiness In Loan Repayment

A credit report is basically composed of your history of paying bills on time, and of how well you are able to handle your finances. When someone is trying to lend you money, they want to see that you have a long history of paying other people back. They want to be able to trust you, because they don’t want to lose money by giving it to the wrong person. By having a high credit score, you show lenders that, yes, you will be able to pay back what you owe.

 

Landlords Use Credit Scores To Weed Out Potentially Bad Tenants

You may have also heard of landlords increasingly asking people about their credit history. This is actually partly due to the nightmare stories landlords have heard (or read about) dealing with tenant who will pay for the first month of rent, then refuse to pay rent for the rest of the time they are legally allowed to be in that apartment.

 

When such issues occur, the bad tenants don’t usually just stay there without paying – they often wreck the apartment in the process. As a result, landlords are now more cautious about who they rent to, which is why credit scores are used.  If an eviction, foreclosure, or judgment shows on a potential tenant’s record, they know what to be worried about. That's what credit scores are used for in both the apartment and mortgage industries. 

 

Employers Use It As A Measure Of Responsibility

Paying your bills on time is one of the most basic responsibilities of being an adult, and employers love a responsible person being on their staff. In some cases, having a good credit score can also reveal other traits, such as financial prudence, foresight, and an overall good sense of what should be done in a variety of different situations. This is often why credit scores are checked by licensing boards before applicants can get a license.

 

Credit Scores Are Telling

It may not seem fair to some, but the fact is that there are good reasons as to why credit scores are used for a variety of different business transactions. Luckily, there are ways to improve credit. After all, everyone has a slip-up once in a while. If you need to rent an apartment, get a loan, or even gain employment, upping your credit score can do a lot of good. If you need help on figuring out how to do it, there are always people you can call on for help.

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