We often hear about how important credit is for a variety of financial transactions, ranging from mortgages to credit cards to auto loans. Yet, there are several areas where credit also matters, which we often forget about. Let’s take a look.

1. Cell Phone Service

Poor credit impacts your chances of being approved for cell phone service (and at what interest rate). After all, cell phone carriers want to avoid customers running up large bills, which they end up not paying. 

Verizon Wireless and AT&T, as well as other carriers, require credit checks for many of their service plans. Those who fall short of these requirements either end up being denied as customers, or otherwise, required to place a deposit, prior to being offered service. 

Quite often, those with weak credit end up choosing a prepaid plan, or joining an existing family plan, where the main account holder, but not additional users, face credit checks. While prepaid plans can be a good option for some people, keep in mind that if you want a new cell phone as well, you’ll have to pay for that upfront, rather than each month. For these reasons, having good credit is beneficial, in terms of obtaining the best deals possible, without having to pay as much out of pocket on day one. 

2. Utilities 

As the Federal Trade Commission explains on their website, when you apply for utilities, such as electricity, gas, or hot water, this is treated as applying for credit. This makes sense, given that we pay our utility bills after using water, electricity or gas. To reduce their risks, many utilities companies run credit checks, prior to offering service. If your credit score is weak, they might refuse to offer service, until you either offer an extra security deposit, or find a cosigner with a good credit score. 

3. Home Insurance

If you currently own a home, or are thinking about buying one in the near future, your credit score will likely play a role. Insurers use what’s known as a credit-based insurance score (CBI), which looks at much of the same information as the FICO credit scores you are familiar with (though the scoring formula tends to be a little different). Insurers believe that those with lower credit scores tend to file more claims, and to pay their bills late. For this reason, having a good credit score will help you reduce insurance costs (while a poor score can lead to paying more).

4. Auto Insurance

Contrary to what many people believe, auto insurance rates are heavily impacted by credit history (in every state except for California, Massachusetts, and Hawaii). In fact, having a low credit score can cost you more, in terms of insurance premiums, than being caught driving under the influence of alcohol. Think about that for a minute. Having poor credit is worse than driving while intoxicated, when it comes to your insurance costs. 

According to Consumer Reports, drivers with “good” (but not the very best) credit scores, end up paying $214 more for car insurance, while those with poor credit end up adding $1301, to their yearly premiums. Why do auto insurance companies care about your credit score? Again, it is seen as a risk factor, in terms of predicting the odds of you actually filing a claim. 

5. Employment

Nearly half of all employers run credit checks, when deciding whether to hire you. Typically, credit checks only occur once an employer has decided to offer you a job, and is verifying additional information. 

Employers often see credit reports as a reflection of your “trustworthiness and responsibility.” What are employers most concerned about on a credit report? Unpaid bills, or a history of late payments, not to mention a foreclosure or bankruptcy, can all harm your employment prospects, particularly for jobs in the service or financial sector.

Conclusion

By now, it’s probably clear that credit counts in many areas of our lives – even when it seems less obvious. So what should you do? 

Simply put, pay your bills on time, keep your debts low. Monitor your credit reports on at least a monthly basis (or even more often if possible). Credit Karma and Experian are good places to do this.  If you run into financial trouble, communicate with your creditors, and do your best to make minimum payments on your accounts. If you make mistakes, consider using credit repair, and credit rebuilding strategies, to clean things up.