Will Your Credit Score Miss The Mark?
Poor Credit Scores Can Impact Future Purchases
Anna Cronk, Staff Writer
UPDATED: 8:05 am EDT June 11, 2007
The definition and impact of credit scores is no mystery to Jared Huizenga, a 28-year-old editor living in Minneapolis who,
like many early-20-somethings, fell into the credit card trap and is still paying for it years later.
A credit score is a number that creditors -- banks, apartment owners, car dealers and anyone else who will sell you
something or give you money to purchase something and draw up a contract for you to pay them back -- use to represent
the risk that a consumer will default on payments.
Each of the three major credit bureaus -- Experian, TransUnion and Equifax -- has a specific, private formula from which
they devise credit scores through consumers' credit history, said Sandy Shore, a manager of counselor training at the
nonprofit financial counseling agency Novadebt, based in New Jersey.
Those scores have a wide range of uses.
"Credit scores are used to grant credit limit increases and to re-evaluate interest rates on current lines of credit," she
explained. "Scores are also used by insurance companies to decide if they will write a policy and what the premium will
be, by landlords to rent apartments and by employers in hiring decisions."
According to Shore, there are several consequences of having a low credit score.
While Huizenga has plenty of debt he is paying off, his recent credit score problem had nothing to do with the debt on the
plastic in his wallet. Earlier this year, he ran into some car troubles, which, with a loan, would have been simple to repair.
However, his credit situation caused some snags.
"My car, which is only valued at about $500, decided it had outgrown its old clutch and was ready for a new one -- to the
tune of $775," Huizenga explained. "If my credit was in any good standing, the logical thing to do would be to buy a
different car, rather than putting almost twice of the car's val