6 Life Events Which Can Affect Your Credit Score

As one of the most important factors that lenders take into account, your credit score has tremendous implications on your ability to gain access to auto loans, credit cards, and mortgages. It’s imperative to closely monitor your credit score, especially when it comes to the following major life events which can torpedo your financial stability. Related: 5 Personal Finance Tips For Managing Your Money

1. Attending College

For many individuals, taking out student loans is the first major life decision which has drastic ramifications for their credit score. By making one’s monthly payments on time, student loans provide Americans in their 20s and 30s with the opportunity to gradually improve their credit score over time. Defaulting on one’s student loans should only be conceived as a last-resort, as this can ruin your economic wellbeing for a long time to come. If you find yourself in financial troubles, it’s certainly worth reaching out to your lender to find a repayment plan which works for you.

2. Purchasing a Home

When it comes to buying a home, it’s important to distinguish between the short-term effects and the potential benefits that can last the rest of your lifetime. Taking out a mortgage requires a hard inquiry into your credit history, which can lower your score by a few points. Don’t be dismayed, though—by making your monthly payments on time, you’ll consistently improve your payment history, which is the single most important criteria of your credit score. This is why for many households, taking out a mortgage and approaching it strategically is the best thing to ever happen to their credit histories.

3. Getting Married

The #1 misconception surrounding marriage is that it will merge your credit score with your spouse’s. In reality, since your credit history is linked to your Social Security number, your marriage has no direct bearing on it, and even changing your last name is inconsequential. The only time that your spouse’s credit score has an effect on yours is if you have joint accounts, which is why it’s essential that you have open communication about your finances before getting married. Otherwise, your score will remain exactly the same as it was while you were single. Keep Reading: Should You Share Your Credit Card With Your Partner?

4. Divorce

Similar to marriage, getting divorced doesn’t directly impact your credit score, but it can indirectly influence your ability to pay your bills on time. Additionally, it’s critical that only you have access to your financial accounts, and that any joint bills are being paid on time.

5. Applying/Losing a Job

It’s becoming increasingly common for potential employers to ask for a full credit report from job applicants, so that red flags can be uncovered before a hiring decision is made. Although this is an unlikely cause to be rejected from a company, it’s a significantly more relevant factor if you’re applying for a job in finance or for a position which places you in a role of financial responsibility. Moreover, keep in mind that losing your job and falling behind on your bills is the bane of many peoples’ credit scores, so be prudent to always keep extra cash on hand.

6. Starting a Business

Launching your own company can be a blessing or a curse for your credit score, particularly if you are taking out personal loans to fund your business. By being a responsible business owner and not biting off more than you can chew, the decision can work wonders for you. But if sales stagnate and you find yourself unable to meet your monthly payments, you can expect your score to plummet. Keep Reading: Starting An Emergency Fund: Why You Need One

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