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9.2 Credit Cards: A Tool, Not a Crutch

Typically, those who can access the
information in your credit report are
lenders, insurance companies, land-
lords seeking a credit check for rent-
ers, credit card companies, employers
(only with your written consent), state
and local child support enforcement
agencies, some government organiza-
tions for specific needs, and other
organizations with which you may have
initiated business. You can and should
check your credit report annually to
make sure there aren’t any errors.
AndreyPopov/iStock/Thinkstock
Equifax, Experian, and Trans Union are
Equifax, Experian, and TransUnion provide one
required to provide you with one free
free credit report per year, so use these websites to
credit report per year, which you can
your advantage. Checking your credit report often
obtain from http://www.annualcredit
will help you avoid any errors or missteps in your
report.com. And be sure to learn more
credit score.
about your rights as a consumer under
the Fair Credit Reporting Act, which
helps insure that the information about you contained in the files of consumer reporting agen-
cies is accurate, fair, and private: https://www.consumer.ftc.gov/articles/pdf-0096-fair-credit-
reporting-act.pdf.

Why Does Good Credit Matter?

Having good credit does matter. If you need to finance your next car, you might not be able to
get a loan if you have a low credit score (or no credit score at all). In fact, you may not be able
to buy a car at all if lending institutions view you as too much of a risk. Finance companies
advertise that they don’t care whether you have good credit, bad credit, or no credit at all.
What these companies really mean is that although they may give you a loan, they will charge
you a very high interest rate for the privilege of borrowing their funds. If you have good credit,
you can get what you want at the lowest possible cost.

To give you a comparison, a bank might charge a customer who has an excellent credit score
2.5% for an auto loan, whereas a finance company that deals with borrowers who have less-
than-perfect credit may charge 17% or more. A person with poor credit may have the same
payment on his used Corolla that someone with good credit pays for his new Escalade. The
difference is the quality of their credit. Borrowing money from a check-cashing firm or title
loan company will have you paying some of the highest rates on the planet—sometimes in
excess of 500%! Read Strategies for Success: What Do I Do If I Have Bad Credit? for tips on how
to deal with bad credit.

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