Effects of Credit Ratings

The effects of credit ratings can be felt in almost every aspect of life. From jobs to purchases, your ability to obtain the job or goods that you want may be thwarted if your credit rating is too low. With a good credit rating, you have more access to savings, financing and job opportunities.

Employment

In finance-related jobs and the insurance industry, prospective employers routinely screen the credit rating of applicants to help determine employment eligibility. These employers believe that a good credit rating equates to positive work ethics and responsibility. A credit rating may also be used to screen for advancement opportunities.

Finance Rates

Credit ratings directly correlate to the finance rate you are offered when applying for loans, credit cards and even bank accounts. The higher your credit rating, the lower the finance rate you are offered for loans and credit cards. Since there is less risk of nonpayment with a higher credit rating, banks can offer better rates. You may be offered higher interest rates for savings accounts if you have a high credit rating since you are a good prospect for other bank-related products.

Insurance Rates

Insurance rates for cars, homes and more are based on statistical risk models. One of the key components in these models is financial stability, which is measured through your credit rating. If you are more stable financially, you are statistically less likely to make insurance claims. Higher credit ratings lead to lower insurance rate premiums.

Housing

The size, rate and ability to obtain a mortgage depend in large part on your credit rating. With a good credit rating, you can obtain a larger mortgage at a better interest rate, which allows you to have more choices when you select a home to buy. A low credit rating could make it difficult to purchase a home, and could even make it difficult to rent an apartment.

Credit Cards

Credit cards with reward programs and high credit limits are offered to potential customers with high credit ratings. Credit cards with yearly fees, low credit limits and no reward programs are offered to those with low credit ratings. With a high credit rating, you also receive lower interest rates and loan offers on your existing credit cards. If your credit rating drops, your existing credit limit may be decreased and your interest rate may be increased.

Financial Stability

High credit scores help you secure your future financial stability. With a high credit score, you are able to pay less for insurance, housing and many purchases that require financing. This extra money can be invested at a higher rate than people with low credit scores. Between the savings and the increased savings rate, you are able to build your retirement nest egg faster and can save more to use for future expenses and emergencies.