How Purchasing Power Is Based On Credit

The world as we know it revolves around the market in we buy and sell goods.  With the exception of the air that you breathe, everything else necessary for survival in the world of today has a price.  Therefore, your purchasing power, which is determined by your own credit score, has an undeniable influence on your everyday life.    

A credit score represents credit worthiness as a triple digit number.  The score can be as low as 300 or as high as 850.  It is calculated from a very complicated formula that takes into five key sections from your credit report: payment history, outstanding debt, credit history age, inquiries, and forms of credit.  There are several actions that you can take which will lower your credit score rapidly, such as submitting numerous card applications in a brief period of time or making late payments.  A lower credit score represents a lower level of credit worthiness, and vice versa for a high score. 

A misconception seems to exist that so long as you do not apply for credit in the traditional sense or that you are not actively using credit to make purchases, then your credit does not affect your purchasing power. However, this could not be further from the truth.  There several companies that have a very broad definition of credit and use your credit score when you might least expect it.  Utility companies view the first month of service as an extension of credit since you don’t pay them up front.  Cell phone companies typically view contracts, no matter how short, as extensions of credit.     

When you have a lower credit than required by each company, you typically will have to pay a deposit.  It is even possible to be denied service altogether with a low score, even when you are able to pay for a service in advance.  For example, rental managers will usually use a credit score when evaluating an application.  If your credit score falls below the stated minimum allowed credit score, then your application will be denied regardless if you offered to pay the full lease in advance.  

Some companies also screen employee applications by using a minimum required credit score.  Any applicant with a score lower than the minimum requirement is tossed into the reject pile. 

Even though the road seems bleak for those with low credit scores, it can be very surprisingly bright for those with high credit scores.  Having a high credit score may allow you to be approved for extremely low interest rate credit cards that have great perks.   Some deposits and higher premiums associated with bad credit may also be avoided.  It is also possible to obtain many different types of loans with lower interest and no money down.