Many folks decide they don’t need a credit rating. They believe it’s a freeing decision: no credit rating to complicate things, no worries about meeting financial obligations and no concerns about what a three digit number can do to their lives. Right? Not so fast.
Some people make the decision to never worry again about their credit rating once they’ve survived the stress of a bankruptcy. They say they’re done with “keeping up with the Jones'” and if they can’t pay cash for it, they simply don’t need it.
Other people say they don’t need to experience a bankruptcy or other credit problems to know they want no part in the rat race, so to speak. They might have been left all the material things they could ever need, including a home, by a grandmother they never met. They might have been born into a well-off family. Others simply don’t want to complicate their lives.
Both of these mindsets are wrong, though – but not for the reasons you might think.
There are hundreds of thousands of Americans living “off the grid” in a credit sense. They have social security numbers, pay their taxes and go to work each day, but for all intents and purposes, they pay no attention to their credit ratings. They never rely on it for anything – or so they think. What’s worse is those who may not rely on their credit ratings, but have those scores affect their every day lives.
Here are a few reasons why paying attention to your credit rating is crucial and why assuming you’re not “on” the grid is a mistake.
Insurance
Did you know that your insurance rates are determined, at least partially, by your credit score? The lower your credit scores, the higher your rates. And the lack of a credit rating doesn’t work to your advantage. Insurance companies haven’t always relied on credit ratings, but with so many dynamics at play, they have increasingly relied on these dynamics to determine the rates you pay.
Government Benefits
Of course, the government’s own credit rating has taken a hit or two in recent months, but you might be surprised to learn the federal government can significantly affect your credit rating. If you don’t pay your back taxes, for instance, the government can attach a lien or garnish your wages. From the IRS website:
…the federal tax lien arises automatically when you fail to pay in full the taxes you owe within ten days after we send our first notice of taxes owed and demand for payment. The government also may file a Notice of Federal Tax Lien in the public records. The Notice of Federal Tax Lien publicly notifies your creditors that the IRS has a claim against all your property, including property acquired by you after the Notice of Federal Tax Lien is filed. The filing of a Notice of Federal Tax Lien may appear on your credit report and may harm your credit rating. Once a lien arises, the IRS generally cannot release the lien until the taxes, penalties, interest, and recording fees are paid in full or until the IRS may no longer legally collect the tax. Paying off your tax debt may keep your tax debt from negatively affecting your credit rating…
The Dream Job
That’s right – more employers are checking applicants’ credit ratings these days. If there are two applicants who are equally qualified, the credit score can be the deciding factor as to who gets the employment offer. And yes – it’s absolutely legal. The company can claim it doesn’t want to take a risk on someone who’s struggling with financial problems. It might keep you from staying focused on your job or it might be that you’re a higher risk in that you may decide to move away in search of a better paying position.
These are just a few of the ways your credit scores can affect your daily life, whether you’re tuned in to what your report reveals or not. While you can live off the grid, so to speak, you could be missing out on money saving discounts and quite possible that dream job you want to pursue.
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