Credit scores are used signficantly throughout modern society in a wide range of industries and instances. The ubiquitous three digit scores are seen as a proxy measure of the trustworthiness and reliability of an individual.

The primary function of your credit score is to quantify on a set scale your use (or misuse) of available credit. Paying bills when they are due, using only a small proportion of available credit at any one time, and avoiding constantly applying for new credit lines are common ways to maintain a high credit score or to raise a low credit score.


It is recommended that you start building credit history early in life in small ways. Some individuals neglect to lay the foundation of credit and find it difficult or unnecessarily expensive to operate in the modern world as a consequence. By laying the groundwork early, you can help ensure the future strength of your score and maximize future potential.

A low or non-existent credit score can create additional expenses or even result in closed opportunities for your future financial or career life.

Lenders are the most obvious group who are concerned with credit your credit score. These are the banks and other institutions that are issuing credit, so it is understandable that they have a vested interest in determining how responsibly you have used credit in the past. A low credit score indicates higher risks to the bank and they will often charge extra fees or interest to compensate for the perceived risk, or even deny the credit application altogether. You may think that this applies mainly to credit cards, but it also affects such broad-based instruments such as mortgages, auto loans, and even loans to open, maintain, or expand small businesses.

Insurance companies are another segment of the financial industry that pays close attention to your credit score. Insurers view responsible use of credit as a sign of a reliable and trustworthy individual and strongly affect what levels of insurance coverage are offered and the premium costs for insurance products. A common application is auto insurance. Insurers believe a high credit score directly relates to the likelihood of a driver to avoid engaging in risky behaviors which would raise the probability of an accident or other insurance claim. And the implications are striking. Surveys indicate that those with high credit scores pay 30% less premiums than average while those at the bottom of the scale pay upwards of 140% more than average.

A perhaps less obvious use of your credit score is in finding an apartment or house to rent. Landlords and property management companies are increasingly using credit scores to determine the likelihood of getting their rent paid on time. Those with minimal or deficient credit scores may be required to add a co-signer on the lease such as a family member or friend, making them legally liable in the event of non-payment of rent. Other landlords will raise the rental rate or increase the security deposit to compensate for their perceived risk.

Employers are another group that is progressively more turning to credit scores to make decisions regarding employees. While legally required to notify you before seeking your credit score, human resource professionals are ever more interested in viewing credit reports. Like other industries, employers may use the information to determine the responsibility level of potential employees. Also, in many highly sensitive jobs a bad credit score is viewed as a risk of being susceptible to bribes or blackmail in exchange for secretive information involved in some occupations.

Even cell phone companies are getting into the credit score game. Many companies check my credit scores before approving service contracts. The obvious reason is that they are interested in seeing if you are likely to pay your monthly bill in a timely fashion. Other utilities may follow suit and change their pricing levels in response to information garnered from a credit report.   Sometimes they will also require a deposit before providing service or deny the service plan completely.