How Cell Phone and Utility Companies Use Credit Scores

While most everyone knows that credit card issuers and banks use credit scores to determine whether or not to lend to us, there are some lesser-known uses for credit scores as well.

For example, you may have heard that employers may pull your credit report (with your permission) when you’re going through the hiring process.

Put simply, if a ton of bad stuff shows up, they may think twice about hiring you. After all, if you can’t manage your own life, they may not want you working for their company.

Cell Phones Are Expensive

So what about things like cell phones? Well, believe it or not, these companies are giving you a quasi line of credit in the form of a subsidized smartphone.

You know that iPhone you get for $200 from AT&T, which normally costs $500 if you buy it direct from Apple?

Well, the cell phone provider will run your credit when you apply for the phone and associated service contract to determine if you’re creditworthy enough.

If you’re not, they may require a security deposit or deny you entirely. Or perhaps offer a less expensive phone instead that they can basically give away for free.

This is yet another reason why you want to establish a good credit score early on. Otherwise you may need someone with good credit to co-sign for you.

Oh, and because a cell phone contract is credit-related, the credit pull will be considered a “hard” credit inquiry, which could lower your credit score.

What About Utilities?

A utility company may also pull your credit to determine whether or not a deposit will be necessary when you fire up service.

So if you’ve got a bad credit score, they may require a sizable security deposit before they’ll agree to light your pilot and turn on the power.

Conversely, someone with good credit should be able to forego the third degree and get their utilities switched on with little hassle, not to mention collateral.

In other words, if you want your heater to come on in the winter, you better keep a close eye on your credit report to avoid any surprises, especially if you’re short in the liquid asset department.

Utility company credit checks may show up as either “soft” or “hard” inquiries, meaning they may or may not affect your credit score.

Keep in mind that these are just a few examples of the many types of companies that may run your credit before letting you borrow anything. The insurance credit score is increasingly being relied upon as well to determine your premium.

And landlords also perform credit checks prior to renting out homes and apartments, so if your score isn’t up to snuff, they may tell you to take a hike in a hurry.

If you already know your credit score, check out my credit score scale. If you don’t, you may want to order your 3 credit scores via a free trial to see where you stand.

Read more: How to improve your credit score.