Creditworthiness (among other things) is largely determined by your FICO score. But, how does this number really play a role in people’s lives? The team at Texas Lending explains in this brief Q & A.
Q: Does a higher credit score really equal lower interest rates?
Texas Lending: Most of the time, yes. Those with a credit score above 700 often get the best rate for everything from car loans to mortgages. Even a percentage or two can really add up. For instance, a person buying a home valued at $300,000 with a traditional 30-year fixed mortgage will pay nearly $100,000 less for that home over the life of the loan if their credit score qualifies them for the current lowest interest rate.
Q: Why do landlords look at credit scores during the rental application process?
Texas Lending: Property owners want to know whether or not a renter will make his or her payments on time. Additionally, people with a higher credit score tend to be more responsible with their own and other people’s property. While a FICO score of 750 doesn’t guarantee a tenant won’t trash an apartment, historically, someone with this score is a pretty safe bet.
Q: Do people with poor credit pay more for utilities and other vital services?
Texas Lending: Absolutely. Individuals with poor credit may be required to make a rather hefty down payment on a service contract. This includes, but is not limited to, electric, cable, and cell phone services. People with no credit history may be asked to provide a cosigner for a contract-based service or rental agreement.
Q: Can employers check credit scores?
Texas Lending: Yes, federal law permits both potential and current employers access to a modified credit report. This practice has been traditionally utilized by companies in financial services, pharmaceuticals, and defense systems but is becoming more common across all sectors.
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