The Unexpected Effect of Credit Reports

Written by , January 9, 2011

Consumers know that the credit score rating that follows them around affects the types of loans available as well as the loan amounts. The musical commercials that tout the importance of getting free credit reports make it clear.

Credit reports do more than allow lenders to evaluate the fiscal responsibility of potential borrowers. It gives many companies and organizations a look into the reliability of a person to pay. A credit history also reveals the financial habits of individuals.

Credit reports can do more than cost consumers a loan that is needed. A credit score can also cause potential employers to look in another direction, landlords to pass on you as a potential tenant and much more. Here is advice about how your credit reports can be used.

  • Insurance companies. Many consumers may be surprised to discover that auto insurance companies review credit ratings before accepting new policyholders. The theory behind the use of the credit reports is that bad credit risk translates into high-risk behavior. The credit rating becomes part of an overall insurance score that companies review to determine the cost of doing business with you.
  • Potential Employers. More and more companies are turning to credit reports to determine the value of a potential employee. The companies must get written permission to review the credit report and use the information to see how consistent and reliable the employee has been in the past in order to predict future behavior.
  • Licenses. When consumers apply for a professional license, the issuing agency will often review the credit report. A clear credit report shows reliability and a habit of staying in sound financial boundaries. A troubled credit report may reveal risky behaviors that do not work well within the profession.
  • Rental agencies. Companies that are renting to individuals need to access the ability (and desire) to pay on time and completely. Reviewing the credit report helps the rental company evaluate the consistency of past payments to determine the likelihood of the future fiscal responsibility.
  • Extension of Current Credit. Many credit companies will initiate a regular review of credit histories to determine the value of existing customers. Based on the review, credit amounts may be increased for those with strong credit ratings or decreased for those consumers who have credit histories with some red flags.
  • Consumers need to understand that a clean credit history can mean an open door into that new job, new apartment or new opportunity.

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