Your FICO score is more than just a credit score – it can have a big effect on areas of your life that, at first glance, completely unrelated to it. No, it’s not just your ability to get credit that is affected by your FICO score, but a whole host of life’s other little challenges. Here are some of the ways that your FICO score can impact your life.

# 1 – It can affect your ability to get a job

Employers will often request to look at your credit score before they’ll consider hiring you, especially if it’s for a job that will involve making financial decisions or handling money. It might sound unfair, but employers often want to know that you’re a safe bet who won’t run off with the profits or make poor money-related decisions due to an inability to manage your own credit responsibly. You have to give your permission for them to see what’s on your credit report so you have the opportunity to deny this request, but you run the risk of looking like you’ve got something to hide.

# 2 – It affects the type of house that you can buy

As your FICO score is used by lenders to determine how big a risk you’re likely to be on repayments, a below-average FICO score can result in you being offering less of a mortgage package, meaning that you’ll need to put down a bigger deposit. The reasoning behind this is that you’re more likely to default on your repayments so they don’t want to take the risk with a large mortgage. In addition, you’re less likely to be offered the better mortgage packages, which can tie you into a worse deal than someone who has a good FICO score. Even if your FICO score does qualify you for a specific mortgage, your monthly payments are likely to be much higher than they would be if you had better credit.

# 3 – It can affect the type of accommodation that you can rent

On a similar note to # 2, your FICO score can also impact on the type of house or apartment that you can rent. Landlords may look at your FICO score to assess the type of tenant that you’re likely to be and whether they should be worried about you defaulting on rent payments. If you’ve got a poor credit score, they may still accept you as a tenant but ask for a higher deposit as security against this.

# 4 – Your insurance premiums could be higher or lower

Some insurance companies use your FICO score to decide how high to set your insurance premiums and whether to accept you for a policy in the first place.

# 5 – You may be denied a bank account

If lenders request your credit report, they may examine your banking history as this is one of the most basic indications that you can handle credit responsibly. As well as this, if your FICO score isn’t very good, your bank may choose to reject your application to open a bank account, especially one that has overdraft facilities. For example, Citibank are known to do this as they conduct in-depth credit checks on account applications.

# 6 – You might not get a contract cell phone

Even cell phone companies can look at your FICO score before they decide whether to approve you for a contract cell phone. If your FICO score already indicates that you’re struggling to manage credit, they may well worry about you paying your monthly bills on time or at all.

# 7 – Even your relationships could be affected

However shallow it may sound, your FICO score could even impact on your relationships. At the most basic level, a bad FICO score can suggest that you’re irresponsible or immature and this can be a turn-off for prospective partners. If you get involved in a more long-term relationship, your FICO score could potentially become a deal-breaker. Depending on how bad it is, you could be denied the opportunity to rent or buy your own home or be approved for a loan to counteract this and this could put the curtains on making plans for your future together.

Finding out your credit score

While you can get your credit report for free from Annual Credit Report (which offers a credit report from each of the three major credit reporting agencies of Experian, Equifax and TransUnion once a year), finding out your credit score takes a bit more work.

The easiest way is to sign up for a trial with one of the credit reporting agencies. Provided that you can cancel the trial in the first thirty days, you should be exempt from having to pay the monthly or annual subscription charges (which are around $20 per month or $90 per year, on average). MyFICO offers a free 30-day trial for its Scorewatch package, which offers credit score tracking to alert you of changes to your FICO score. Cancel within the 30 days and you should get your FICO score without being tied into the subscription.

Improving your FICO score

Don’t despair if your FICO score isn’t very good at the moment, as there are things that you can do to turn things around.

• Pay your bills on time. This is likely to be one of the biggest reasons why your FICO score is low as your payment history makes up 35 per cent of your FICO score. Making on-time payments goes a long way towards upping your credit score, and signifies to creditors and lenders that you’re responsible with credit.
• Don’t use too much of your available credit. If the available credit limit on a credit card is $5000, it’s tempting to use it. This is a bad move for your credit score as it indicates that you’re living beyond your means. It’s best to use a maximum of 30 per cent of your available credit limit, so that credit card with the $5000 limit should have a maximum of $1500 as a balance.
• Don’t close your oldest credit lines. Contrary to popular opinion, canceling credit cards won’t necessarily be good for your FICO score – especially if the card(s) in question go back several years. Getting rid of your oldest credit lines means taking a big hit to your FICO score, as the length of your credit history counts for 15 per cent of it. Another effect of canceling credit cards is the fact that it can change your debt-to-credit ratio by reducing your available credit and making it more likely that you will be using up a higher amount than recommended.

Don’t Get Obsessive About It

Ultimately your FICO score is important, and it’s certainly a good idea to keep an eye on it andm if necessary, take steps to imporove it. Having said that, make sure you keep things in perspective, and don’t start to define yourself by how high or low a certain constantly changing three digit number is.

Photo by rachael hubbard

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5. Everything you wanted to know about Fico Scores*