What Your Credit Score Can't Do
If you want to take out a mortgage or another type of loan, your credit score can play a big part in what interest rate you get, how much money you get to borrow, and whether you're approved at all. But there are some things a credit score can't do.
Well, there are a lot of things. But you knew it couldn't wash your car, give you a haircut, or get you pregnant, right? Right. While we think you should always know your credit score, and take steps to improve it if necessary, here are a few things your credit score doesn't have the power to do:
1. Change your spouse's credit score. If your spouse's score is higher or lower than yours, that won't change your score. When it comes time to apply for a home loan, though, you may want to apply based on the person with the higher score. Just make sure both your names are on the deed.
"I had a shorter credit history, so we applied for a mortgage in my husband's name to get a better interest rate. We're both on the deed to the house, though, so I always joke that my half is paid off. I don't think he thinks it's very funny, but I do!"
- Happy Wife with No Debt
2. Change the amount you pay in rent. While your landlord can't raise your rent based on a bad credit score, it can be more difficult to get approved for an apartment or home. If you do get approved, you may have to pay a higher security deposit, which is a good incentive to keep your place looking nice while you live there, so you can get that deposit back.
3. Stop you from adopting a pet. Most shelters don't do credit checks, but they will take steps to ensure you have enough cash on hand to support a new cat or dog. Before you adopt a pet, you should do your own mental credit check, even if it isn't official, and make sure there's room in your budget for the basics as well as any unexpected expenses.
4. Get you a better price on a house or a car. You may be able to get a better interest rate on a loan with a higher score, but the price of the goods stays the same.
5. Stop you from getting a federal student loan. Student loans backed by the government serve a different purpose than home, car, or other personal loans. You can't be turned away because of a low credit score. They're designed to help you get an education if you can't afford it, hopefully raising your earning potential in the future. While a low credit score can't stop you from getting these loans, do remember this: Most student loans don't go away if you have to file bankruptcy.
"Part of the reason student loans are easier to get than other loans is because pretty much the only way to get rid of them is by paying them off, no matter how long it takes. "
You can change the payment schedule, you can defer the payments, but you cannot escape the payments. It's a lot to ask a young person just starting out to think that far head, but if you need student loans, find out as much as you can about the repayment terms and imagine how that'll feel in the long term. If you take out private loans for your education, your approval will be subject to your credit score and other factors, just like any other loan.
6. Indicate how much money you have in the bank, or a retirement account, or any other investment account. A credit scores rates your history of using credit, how you accrue debt, how you pay it off, and how well you manage it. Your credit score doesn't show how much money you have, how much your property is worth, or how much money you make. Your score only addresses debts and repayment.
"Your high credit score will help you borrow money, but as a wise man once said, "Save now for retirement, because nobody will lend you money to quit work and die."
7. Make you spend your whole paycheck on whatever you want and stop saving. Like we said, a credit score doesn't show how much you have in the bank, or what your prospects for financial freedom and security are. Though it's nice to have a high score, don't pat yourself on the back just yet. Your high credit score will help you borrow money, but as a wise man once said, "Save for retirement, because nobody will lend you money to quit work and die." Truth.