A Reason for Everyone to Have Good Credit

Why Do I Need Credit?

Many of you might be thinking, “why would I want to borrow money and establish credit if that is what got me into bankruptcy in the first place?” Others might also be saying, “If I already own a car and a home, there is no reason to go down the credit road again.”

In short, my response is simple. We now live in a world that revolves around credit. Due to the magnitude of people (consumers), all around the world; the word of a consumer or even their signature in a contract, does not have the weight it once did. For this reason, more businesses, companies, and associations, are relying on credit history and reports to vouch for you. The list and number of entities that now want to pull a credit report on you are growing, so even if you don’t want to use credit, it is still important to establish good credit.

Who Cares About Your Credit Score?

Bear with me and don’t lose interest, this may seem like a lot of information to mentally digest, so I recommended scanning the bold headlines and reading about the entities you are most curious about.

• Utility Companies: Yes, if you are a Florida resident and want to hook up to the electrical grid, Florida Power and Lighting (FPL), cares about your credit history. According to a link from their website, (FPL Residential Deposits), “To ensure fairness to all customers, some customers are required to secure their accounts with a deposit.” To determine the deposit amount, they use a credit scoring system that looks at, yep! You guessed it, your credit report and credit history.
• Cell Phone and Internet Providers: The technology boom has hit; living without internet and cell phones is a thing of the past. In a blog titled, “More People Around the World have Cell Phones than ever had Land-Lines,” the United Nations telecommunications agency has reported that in 2013 there were 96 cell-phone subscriptions for every 100 people in the world.
• Comcast: According to the Comcast Agreement for Residential Services, Section h. Our Rights to Make Credit Inquiries, “You authorize us to make credit inquirers and to receive information about your credit experience…”
• Verizon: According to the Verizon Customer Agreement, if you wish to receive bills at the end of a billing period they may investigate your credit history at any time.
• Insurance Companies: Insurance is important and similar in theory to credit. It allows us to protect things, “insure them,” with payments now, so if they are lost, damaged, or stolen, we do not take a big financial loss; making insurance an important, if not necessary, purchase for anyone. In the blog titled, “Why do Insurance Companies Require a Credit Check?” credit checks are said to be run on applicants because studies have shown that financial and credit history is a strong predictor for insurance claims. o Insurance Scores: Insurance companies look at different elements on a credit check to give each applicant a different insurance score.
  • According to the Allstate web page on the use of credit information, listed below are some things they use to assess your insurance score.
    • Payment History
    • Length of Credit History
    • Number of Credit Accounts
    • Credit Inquiries (does not include any inquiries made by other insurance agencies
    • Bankruptcies, Foreclosures, and other types of Collection

Banks

• Mortgages: If you are thinking about applying for a mortgage after bankruptcy you will need to start establishing three new credit accounts after bankruptcy.
• Car Loans: If you are looking for a car loan after bankruptcy it is important to improve your credit score and your credit history. For more information on credit scores and credit history/reports click on the respective links directing you to our blogs on the topics: Credit Scores, Credit Reports.

Credit Cards

One of the best ways to improve your credit is a credit card, that you pay off in a timely and consistent manner. Different types of cards are available: secured or unsecured. Both with different benefits and costs, for more information regarding secured and unsecured credit cards click the following link to our blog on the topic: What’s Better Secured or Unsecured.

Credit Can Help You

The theory behind credit is an agreement between a lender (the creditor) and the consumer (you) to repay borrowed funds, allowing you to spend money now, that you will earn and payback later. This process of building credit improves your credit score and history, demonstrating to the world that you can handle finances. So, when different businesses and associations run a credit report on you they will give you lower rates, and down payments for their services because your credit history establishes credibility with them.