Why good credit matters — even if you don’t plan to borrow
Even if you don’t plan to borrow a dime, a good credit record is valuable. Think of it like a household fire extinguisher: It’s smart to have a good one even though you have no plans to use it.
And your credit can influence your life in ways beyond borrowing. Here’s why good credit is so valuable.
FLEXIBILITY IN A CRISIS, MORE OPTIONS IN GENERAL
If the coronavirus pandemic has taught us nothing else, it’s that we cannot count on things going as planned. Flexibility is key.
A good credit score can help you borrow at a reasonable cost. That in turn could help you buy groceries and other necessities even as your emergency fund is dwindling.
If you use investments to help pay living expenses, as many retirees do, access to credit may help tide you over when the markets are down.
Good credit can also be useful in leasing a place to live, because landlords sometimes check credit to evaluate tenant applications. Similarly, some employers check credit reports during the hiring process (although some jurisdictions restrict using credit reports in this way).
SAVINGS YOU CAN PUT (OR KEEP) IN THE BANK
Good credit also can lower some bills. Nationally, a good driver with poor credit would pay an average of $2,506 annually for car insurance. With good credit, the same coverage would cost $1,427. Only California, Hawaii and Massachusetts prohibit credit data from being used in setting car insurance rates.
Credit-based insurance scores are also used to set homeowners insurance premiums in most states, except for California, Maryland and Massachusetts. Poor credit can increase the cost “10% to 15% typically,” says Robert Hunter, director of insurance at the Consumer Federation of America. That works out to between $50 and $100 a year for most people, he notes. Renters...
