Credit ratings help individuals access loans, housing and employment opportunities, as well as better insurance and interest rates. Alternatively, they help financial and lending institutions learn about an applicant's credit worthiness. MSN reports that a credit rating can also tell about an individual's ability to act responsibly and honor agreements.
Rental Housing
Before renting an apartment or home, it is common for property owners to review a prospective tenant's credit rating. Credit ratings show an individual's payment history with creditors and service providers, such as cell phone and electric companies. An applicant who has a good bill payment history is more likely to be approved to rent a property because he is more likely to pay the rent on time.
Home and Auto Loans
Financial institutions also use credit ratings before giving a prospective home owners or car buyers a mortgage or auto loan. In this case, a lending company may verify an individual's income, cash assets, payment history and credit score to make sure he has enough money to afford the mortgage or car payments, and can make those payments as scheduled. Additionally, a good credit rating can give an individual a lower interest rate, which will reduce the total amount of money spent on financing a home or car.
Employment
It is common for an employer to check an applicant's credit history before offering her a job. Often, this practice is part of the company's background investigation. The Biz Press, a website that provides information about running a business, reported that nearly 50 percent of companies in June 2010 ran credit rating checks on applicants. A good credit rating can make an applicant appear more attractive to a prospective employer because, according to The Biz Press, the individual appears more reliable and trustworthy.
Insurance Rates
When purchasing an insurance policy, it is common for an insurance company to run a credit check on a customer. According to MSN, the better the credit rating the cheaper the insurance premium will cost. Insurance companies have found that those who have better credit ratings are statistically more responsible, make premium payments on time, are safer and are, therefore, less of a risk. Because insurance companies base their premiums on statistical information, a good credit rating can help an individual secure a better policy premium.
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