Your credit history matters to more than just banks and credit card companies.

3 minute read

You probably already know that credit card companies and banks can access your credit report when you apply for a credit card or loan. But did you know that your credit history can also affect other important areas of your life?

Your credit report can determine where you live, how much you pay in car insurance and maybe even whether you get hired for a job. Not everyone who accesses your credit report needs permission, either.

Here are three businesses that can access your credit history and why your credit report matters.

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Landlords

Landlords and apartment complexes frequently run credit checks on prospective tenants. Apartment and rental managers want to know your credit history because it’s a good indicator of whether you’ll pay the rent on time. The apartment manager should tell you that the complex will run a credit check, but your direct permission is not required.

That’s because when you fill out the application to rent an apartment, you’re granting permission with the application itself, according to major credit bureau Experian. The apartment manager may tell you that they will run a credit check but is under no legal obligation.

If an apartment complex refuses to rent to you based on the results of a credit or background check, it must provide you with a notice of the adverse action orally or in writing, according to the Federal Trade Commission (FTC). The notice must include the name and contact information of the company that supplied the report and inform you of your rights to correct or explain inaccuracies.

If your credit might concern a potential landlord, be proactive. Tell the apartment manager that you know your payment history is lacking. Then explain the circumstances and reassure management that you’re back on track and pay your bills and rent on time.

Find out: How to Read and Understand Your Credit Report

Car insurance companies

When you’re shopping for car insurance, the agent will probably check your credit before quoting a rate. However, the credit score you’re used to seeing, such as a FICO score, isn’t the score insurance companies look at. Instead, auto insurers use what’s known as a “credit-based score” to determine risk.

An auto insurance company can access your credit-based score without your permission in most states. FICO, LexisNexis and other companies create credit-based scores, which are different from the credit scores used by credit card companies, banks and other lenders. However, the credit-based scores are calculated based on your credit report from at least one of the major credit bureaus (Experian, TransUnion and Equifax).

Credit card companies and lenders use your credit score to predict chances of delinquency. Car insurance companies use your credit-based score – along with factors like income, employment and driving history – to predict claim risk, since research suggests that people with lower credit-based scores are more likely to file a claim.

Find out: What’s the Best Way to Fix a Mistake on Your Credit Report?

Potential employers

The last thing you want is for an old debt you blew off a few years ago to be the thing that keeps you from getting that dream job. But if your credit report reflects a history of paying late or defaulting on loans, an employer may opt to hire someone who has better credit.

That’s because if you have a lot of debt or your credit report shows signs that you’re struggling financially, a potential employer may worry that you could embezzle funds or steal merchandise. And if your credit report has a few late payment accounts, that could look like you’re disorganized or put off important tasks, undesirable traits for an employee.

Unlike landlords and auto insurance companies, a potential employer must notify you and get your written permission before doing a credit check. Some states don’t allow employers to perform credit checks on potential employees.

If an employer is planning not to hire you based on the credit check results, it must notify you before making a hiring decision. That way, you have a chance to plead your case and explain extenuating circumstances that may have caused credit problems in the past.

Find out: 6 Things a Credit Check Tells Potential Employers

How to check your credit report

Now that you know how your credit can affect these important areas of your life, be proactive and find out what’s on your credit report and how it affects your credit score. Do you have late payments on the report? If so, they’ll automatically drop off after seven years, so time is your friend when it comes to improving your credit.

Are all your credit cards maxed out, lowering your credit utilization rate and credit score? You may want to lower those balances before applying for a new job.

You can order one free copy of your credit report weekly at AnnualCreditReport.com through April 20, 2022. When you get the report, review it carefully and regularly, looking for ways to improve your credit so you don’t run into credit check roadblocks later.

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About the Author

Deb Hipp

Deb Hipp

Deb Hipp is a full-time freelance writer based in Kansas City, Mo. Deb went from being unable to get approved for a credit card or loan 20 years ago to having excellent credit today and becoming a homeowner. Deb learned her lessons about money the hard way. Now she wants to share them to help you pay down debt, fix your credit and quit being broke all the time. Deb's personal finance and credit articles have been published at Credit Karma and The Huffington Post.

Published by Debt.com, LLC