Your Free Credit Score: How A Low Score Affects You

There is a nationwide concern about credit scores and credit reports, and to those who hate doing the mathematics this probably appears unnecessarily obsessive. What these people don't realize is that there is a major -- and valid -- point to this "obsession." How does a low credit score affect you? Here's the inside information:

Higher interest rates on credit lines

Unbeknownst to the uninformed, if you have a low free credit score you end up paying a lot more in the long run because of the higher interest rates given to you by lenders. For example, if you apply for a $200,000 home mortgage loan with a 30 year fixed mortgage and you're given an 8% interest rate, you'll be paying close to $100,000 more in interest over the term of the loan than a person who was given a 6% interest rate. The same principle applies to credit cards, auto loans, and other credit lines that a person with a low free credit score applies for.

Higher auto insurance rates

The majority of automobile insurers look at your credit score when you apply for car insurance. You may not realize it, but if an insurance company looks at your low free credit score and sees that it is not ideal, they will give you a higher interest rate for your car's insurance than somebody with a better credit score.

Higher homeowner's insurance

Insurance experts believe that there is a correlation between low credit scores and the probability of filing property insurance claims. People with poor free credit scores are therefore likely to be given higher insurance rates on their homeowner's insurance.

Higher life and health insurance premiums

When a customer is unable to pay his or her monthly insurance premium, the cost is passed along to the insurance company, resulting in a loss for them. On the other hand, people who don't default on their insurance premiums are more profitable. Insurance companies will therefore tend to give higher insurance rates for people with low free credit scores in order to protect their own interests.

Less chances of being hired or promoted

These days, employers look at the credit reports and free credit scores of people they are looking to hire, promote, reassign, or appoint to sensitive positions. While they may not admit it, they want to make sure that in addition to a good employment record, the person they will hire shows an ideal picture of how he or she handles personal financial affairs. The applicant's free credit score becomes even more important when there is intense competition for a position, or where the candidates are almost equal in their educational background, skills, training, and experience.

Monitoring your credit report and credit score, and making the right decisions on credit will help you ensure that you present a good picture to lenders as well as prospective employers. You can read more about how to get your free credit score on our website, where we also discuss credit reports and how to get a low credit score loan. In addition, you can read our articles on free credit scores and other topics in order to better understand how a low credit score affects you.

By: mrcredit101

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Jeremy Englewood is a credit manager and writer with over fifteen years experience in the banking industry. His advice on personal finance topics such as free credit scores have provided inspiration to people who want to repair their credit. Read more of his articles here.