What Your Credit Score Says About You

Posted: 10 Aug 2010 04:00 AM PDT

You know that your credit score influences decisions that others make about you regarding your finances. And your credit score is about more than determining whether or not you get a loan, and what interest rate you will receive. These are major considerations, and they can mean a difference of thousands of dollars. However, employers, insurers and even Internet providers also use your credit score to make decisions. Your credit score is a numerical representation of your financial habits, and some even make other assumptions about you based on your credit score.

Obviously, your credit score tells others about your payment history, how long you have had credit and whether or not you present an acceptable financial risk to a lender or landlord. But what else does your credit score say about you?

Discipline

Your credit score can indicate your level of discipline, at least in the eyes of others. Employers might view someone with a poor credit score as someone lacking in the discipline to do what is needed in order to keep your credit score up, and others worry that such a characteristic might carry over into other areas of performance. Someone with a high credit score is often perceived as having solid discipline, and capable of making tough decisions in order to maintain the proper balance in one’s lifestyle.

Integrity

Some employers (and others) might decide that a low credit score indicates questionable integrity. A high credit score, on the other hand, can indicate a willingness to fulfill obligations and stay away from commitments that can’t be fulfilled. Someone who has a low credit score may also present other risks. A low score could lead an Internet service provider may be wary of entering into a contract with someone who may not pay as promised. Employers may worry that someone in enough debt to result in a low credit score may be vulnerable to accepting bribes, or may even be tempted to embezzle.

Responsibility

Many insurers, especially auto insurance companies, believe that there is a correlation between responsible financial behavior and responsible behavior behind the wheel. The reasoning is that those who have a good credit score must be making responsible financial decisions, and are more likely to behave cautiously and responsibly when making driving decisions. Thus, more responsible driving = fewer accidents and claims = lower premiums. Those with low credit scores are often perceived as less responsible, and may be penalized, since they represent a bigger risk.

Bottom line: It may not be fair (especially if you have had an unexpected financial, medical or other catastrophe), but your credit score is increasingly becoming associated with decisions that may not strictly relate to your credit history. Because it is simple, short and relatively easy to comprehend in a single glance, your credit score is rapidly becoming a measure for those who feel they are taking a risk on you. A potential employer may still have to get your permission to check your credit, but more employers are asking for that permission — especially if a background check is required for a job.

Before you dismiss the importance of a good credit score, stop and think about what it might be saying about you.