In most situations, trust isn’t something you can give a numerical value to. When it comes to your credit score, though, that’s exactly what happens. Your score indicates the likelihood that you’ll repay a loan and make your payments on time. Credit reporting bureaus allocate points for factors like bill-paying history and outstanding debt. Those points are added up to become your credit score.

How to Build Credit History if You Don't Have Any Pre-existing Loans -  Bajaj Markets

This score, in turn, is used to help lenders determine whether you’re worth taking a financial risk. The higher your number, the more trustworthy you are deemed to be. Lenders, utility companies, potential employers, and more will use this score to determine how or whether they do business with you. In this article, you’ll learn some of the many reasons why your credit score matters.

You, Will, Qualify for Better Credit Cards

Having stellar credit is not an absolute requirement to get a credit card, but it certainly makes more options available. Cards with lower interest rates and lots of perks are usually restricted to those with high credit scores. You’ll also have a more challenging time qualifying for those 0% APR introductory offers or low-teens rates without a solid score.

These benefits can help you save significant amounts of money over time. To work toward owning a card that provides such perks, consider a credit builder card. Such cards are often easier to qualify for and can help you create good financial habits. In turn, these habits will help your credit and set you up for a better future.

You’ll Be Able to Rent an Apartment.

As you move toward that better future, you may seek a new place to live. During that search, your credit score will be an important factor. Landlords often take a look at potential tenants’ scores when determining whom to rent to. A higher credit score can get you approved and may result in a lower security deposit. Because a good credit score demonstrates your ability to pay bills in full and on time, you’re seen as less of a risk. Rental companies and landlords don’t want to take a chance on someone who may not pay their rent each month.

You’ll Get Lower Insurance Rates.

Your credit score is a peek into your financial history and is used to determine how great a risk you are. For insurance companies, risk management is a vital part of their business. While a firm can’t deny you insurance because of a low credit score, that score can impact how much you pay for coverage. Auto insurance companies, in particular, take your credit score in to account when setting rates. Research has shown that, statistically, those with lower credit scores tend to file more claims. Because of this, a lower score means you’ll likely pay a higher insurance rate. You’re a greater financial risk, and the company wants to balance that out.

You’ll Pay Lower Utility Deposits.

Other companies that will seek to balance out a potential financial risk are utility companies. A lower credit score will mean you pay a higher deposit to turn the lights on in some cases. Conversely, if you have a higher score, you may not need to pay a security deposit at all. The good news is, you may be able to use your utility payments to increase your score over time. Demonstrating an on-time payment history is one of the best ways to improve your credit score. However, this isn’t something that happens automatically. You’ll need to sign up for a service that factors in your utility payments as part of your credit history.

You Can Get Better Cell Phone Plans

Your credit score also impacts what cell phone plans are available to you and how much they cost. Providers may not offer you a contract if your score is too low. Or they may only offer one that requires you to pay a large deposit. Again, it all comes back to trust. Your credit score is an indication of how likely you are to pay your bills. Your low score may be sending the message that you won’t keep up on payments. Phone providers don’t want to risk not getting their money, so they’ll find ways (deposits, prepaid plans, etc.) to make up the difference.

You Can Get a Mortgage or Other Loans at Better Rates

This risk management strategy is also apparent in how credit scores impact interest rates on loans. Home and auto loans are notorious for this. A higher credit score means your interest rates for these loans will likely be lower. This will save you money over time. How much will it save you? Quite a bit, according to Informa Research Services. Having a FICO score over 760 could have you paying $65,000 less on a mortgage than someone with a score in the 620s. A higher score means savings on auto loans as well. Hanging on to thousands of dollars over the years will make a huge difference to your financial situation.

You Improve Your Chances of Getting Hired

Your financial history also impacts your ability to land a job. While not all businesses do this, some will check your credit before hiring you. Positions that would allow you access to money or sensitive customer information are more likely to require a credit check.

While the check a potential employer performs will likely not include your score, they can still access your credit history. This will show them any open lines of credit, your history of employment, and other financial information. Though such checks may seem invasive, there is a purpose to them. The employer needs to know they can trust you before committing to hiring you.

Your credit score is a mark of your financial trustworthiness. Simply put, a high score means you can be trusted, while a low score signals you cannot. So do what you can to build your credit early. Set yourself up for success by making smart financial choices now. Your future self will thank you.