How Your Credit Score Affects Purchasing Power

Buying and selling goods and services is the hallmark of today’s society.  Except for the air you breathe, everything you need for living must be purchased – clothes, food, transportation, and shelter.  Three little digits known as your credit score have a great influence on your ability to purchase these things.

Your credit score is a numerical summary of your financial history.  The number is calculated via an algorithm that takes into account your payment history, debt level, length of credit history, credit applications, and types of credit.  Certain actions, such as making several applications for credit in a short period of time, have a negative effect on your credit score, which can range from 300 to 850.  The lower your credit score, the harder it will be for you to obtain certain services.

You might first think that your credit score shouldn’t come into play as long as you aren’t purchasing something using credit.  Many service providers define credit in a much broader sense.  The electricity company defines credit as extending one month of service to you when you.  Your cell phone company considers your one- or two-year contract as a form of credit.  Each of these companies will use your credit score as a determining factor to extend these services to you.

A low credit score might mean that you pay an additional deposit for services such as utilities and cellular phone service.  Even worse, you could be denied for some services solely on the basis of your credit score, even if you have the money to pay for the service up front.  Many landlords use your credit history as a basis of extending a lease to you.  Some of these landlords establish a minimum credit score requirement.  Fall below this credit score and you could be denied the rental, even if you were going to pay for the entire lease up front.

Certain employers use the credit score as a contingency for employment.  An application for employment can be denied if your credit score is low.

The same way that a low credit score can seemingly slam doors in your face, a high score can open doors you might not have realized existed.  Most people who have high credit scores don’t realize the benefits extended to them.  A higher credit score allows you to qualify for platinum credit cards that provide many rewards for credit card use.  Lower interest rates and security deposits are some other advantages that a high credit score can yield.

The Credit Repair Newsletter brings you more tips like these every month.