Credit Cards Credit Card Basics 5 Reasons For Keeping A High Credit Rating Good Credit Is Important For Modern Living By LaToya Irby LaToya Irby LaToya Irby is a credit expert who has been covering credit and debt management for The Balance for more than a dozen years. She's been quoted in USA Today, The Chicago Tribune, and the Associated Press, and her work has been cited in several books. learn about our editorial policies Updated on October 31, 2021 Reviewed by Khadija Khartit Reviewed by Khadija Khartit Khadija Khartit is a strategy, investment, and funding expert, and an educator of fintech and strategic finance in top universities. She has been an investor, entrepreneur, and advisor for more than 25 years. She is a FINRA Series 7, 63, and 66 license holder. learn about our financial review board In This Article View All In This Article Credit Can Affect Where You Live Auto Loans Require Good Credit Credit Checks For Employment Business Loans Require Good Credit Living Expenses Can Require Good Credit You Need Good Credit To Live Comfortably Frequently Asked Questions (FAQs) Photo: Jose Luis Palaez Inc / Getty Images Society is becoming increasingly dependent on credit to make purchases and other financial decisions. A good credit score is used for more than just getting a credit card or a loan. Credit scores demonstrate your history of paying your debts to entities that loan you money. Due to extending themselves beyond their means, many people cannot pay their debts. At the same time, general living expenses take a toll on people's paychecks. Businesses have good reason to insist that you have good credit before providing products or services to you on credit. Some employers are even beginning to run credit checks to see whether you can be trusted with company finances or other assets. If you have a history of not being financially responsible, you may run into problems finding work. Credit Can Affect Where You Live Before you can buy a house, mortgage lenders want to know that you won’t default on your mortgage. If you don’t have good credit, the lender will consider it risky to give you a mortgage loan. If you're approved for a mortgage, your credit affects your interest rate. Interest rates directly impact your monthly mortgage payment, by either increasing or decreasing the amount you are charged. Low credit scores will cause a loan application to be disapproved, or approved at a higher rate. While you may not currently be in the market for a house, your credit is still important. Landlords also use your credit to decide whether to rent to you. Property rental is considered to be a loan, and owners want to be sure they will be paid. Auto Loans Require Good Credit Most people do not have the money to fund a vehicle and cover living expenses at the same time. Many will apply for an auto loan. Your credit rating affects whether you are qualified, the amount you can receive, and the interest rate of the loan. Generally, loan applicants with a higher credit rating can qualify for larger loan amounts with lower interest rates. A low credit rating will limit your choices. Few lenders will work with you if you have low credit, and those that do will charge a much higher interest rate on your auto loan. A higher interest rate will significantly raise the amount you pay monthly on the car, which raises the total amount you'd pay over time. Credit Checks For Employment Many employers conduct credit checks as part of the hiring process. (Note that employers check credit reports, not credit scores. Some jurisdictions prohibit prospective employers from using applicants’ credit reports.) If you haven’t demonstrated financial responsibility, a prospective employer might be hesitant to hire you. For example, the employer might believe your level of debt is too high for the salary offered. Some employers also check credit reports before giving a promotion or raise, especially for financially-related or executive positions. Business Loans Require Good Credit Many people dream of starting their own business. Most business startups require a sizable amount of cash that you might not have available. In that case, you’ll need to obtain a small business loan. Among other things, you need to have good credit to qualify for the business loan. Living Expenses Can Require Good Credit It might be somewhat shocking to learn that your credit is needed to establish utility services. Electric companies contend that you’re borrowing one month of electric service. Before turning on your electricity, the company will check to see if you have good credit. Most utility services conduct credit checks, including cable, telephone, water, even cell phone service providers. You Need Good Credit To Live Comfortably Since your credit is defined by how you’ve paid (or not paid) your bills in the past, many businesses—landlords, mortgage lenders, utility providers, and even employers—use your credit to predict your future financial responsibility. Anytime you need to borrow money, finance an essential item, or set up services, your history of paying bills (your credit) is called into question. Frequently Asked Questions (FAQs) What is a good credit score? There are different credit bureaus, and some have multiple ways of scoring credit histories, but in general, scores range from about 300 to 850. A "good" credit score could be considered 670 or higher, but that's a rough rule of thumb. Which credit score matters the most? The credit score that matters the most is whichever one is being checked by the entity you're dealing with. When you apply for a loan, credit card, or any other kind of credit, the entity you apply to can decide how and where to check your credit. In general, FICO scores are used most often, especially in lending situations. How do I check my credit score? You are entitled by law to a free credit report from each of the major credit bureaus once per year. You can request these reports at AnnualCreditReport.com. There are also several credit monitoring apps and services, some of which are free, that allow you to track your credit throughout the year. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Experian. "Do Employers Look at Credit Reports?" NYC Human Rights. “Credit Check Law: For Employees.” Federal Trade Commission. ”Utility Services.”