6 Everyday Expenses That Cost More if You Have Bad Credit

In personal finance, few numbers are more important than your credit score.

Those three digits — usually ranging from 300 to 850 — can make or break your financial life. Your credit score is a key factor in determining whether you qualify for a loan, credit card or even a place to live.

But that's just the tip of the iceberg. Because your credit score is seen as shorthand for how reliable you are, it can affect how much you pay for a wide variety of goods and services.

That list grows even longer when you realize you don't have just one type of credit score — you have dozens. Each type is created and used by a different industry, whether you're banking, renting a home or buying an insurance policy.

Here's a look at six common expenses that could cost more if you have bad credit:

1. Rent

Landlords often run credit and background checks on prospective tenants. About 9 in 10 landlords now rely on tenant screening services to make renting decisions, according to estimates from the National Consumer Law Center, an advocacy organization. And the information included in the reports is vast.

Depending on which company they use, a landlord might see your regular credit score, which is typically generated by Equifax, Experian or TransUnion. Or they could get your tenant score, which is based on factors such as rental history, prior evictions, legal housing disputes and criminal records.

If you have a low credit or rental score, you may be explicitly charged more in rent or a hefty security deposit, according to the Federal Trade Commission.

In extreme cases, the landlord may simply not rent a home to you at all. Increasingly, experts say landlords who notice any previous housing-related lawsuits — regardless of the outcome or reason — may view the renter as a potential hassle and choose to deny the application outright.

2. Auto insurance

It’s no surprise that your driving record, age and annual mileage are used to set your auto insurance premiums. But your credit score? What's that have to do with driving?

A 2023 report from the Consumer Federation of America highlighted how heavily car insurance companies now weigh drivers’ credit scores. Insurers use them as a proxy to gauge how risky a driver might be.

The advocacy group found that Americans with great driving records but poor credit pay 155% more on average than similar drivers with excellent credit. The federation said the practice disproportionately harms low-income Americans and people of color because of financial inequalities that result in lower credit scores but not necessarily worse driving histories.

3. Homeowners insurance

Aside from the condition of your property, location and whether it’s susceptible to natural disasters, a lot of your financial information goes into the ultimate price you pay for homeowners insurance.

Your previous insurance claims, income, payment history and more all form an insurance score that’s separate from your everyday credit score. If the score is low, home insurers can and probably will charge you more.

A recent study by the National Bureau of Economic Research found that an individual’s credit score had as much an impact on their premium as disaster risk. A homeowner with a low insurance score paid 24% more for identical coverage than a homeowner with a high score, noting that the overlooked cost is a major blind spot in discussions about housing affordability.

4. Bank accounts

For checking and savings accounts, banks use a separate score from your everyday credit score. These are produced by companies like ChexSystems and Early Warning Services, the latter of which is co-owned by some of the largest banks in the country.

The scores generally range from 100 to 899, and they are officially used to help banks manage risk and fraud. But your score can be dinged for opening or closing too many accounts, receiving too many account inquiries, missing payments or overdrafting. People with scores below 600 generally have their accounts flagged or closed and will have trouble opening new ones.

Aside from potentially not being able to access a bank account whatsoever, a low ChexSystem score, for example, often results in you paying more for the account you do qualify for, according to research from San Francisco’s treasury office. The account may have monthly maintenance fees or have higher rates for overdraft or nonsufficient fund fees.

“Negative marks shape which products a consumer is offered in the first place,” Amanda Fried, chief assistant treasurer of San Francisco, tells Money in an email. “Someone with a flagged history may be steered toward a higher-cost account rather than a standard one.”

5. Phone and internet

When you sign up for a phone or internet plan, the telecom company usually checks your credit. What they see is probably not your normal credit score.

The main financial information agency for phone, internet and utilities plans is the National Consumer Telecom and Utilities Exchange, or NCTUE. This firm was founded in 1997 by leading telecom companies at the time, including AT&T and Sprint. The company now partners directly with Equifax and uses telecom-related data to create a unique scoring system between 100 and 999.

In addition to typical credit data, this score is based on your telecom account payment history, charge-offs, account closures and customer service issues.

While this score is generally not used to set your individual price on your phone or internet bill, it is indirectly used to determine whether you qualify for a certain plan or package — and those vary by price. More often, telecom companies use the score to calculate (or waive) an upfront security deposit or for financing for phones, routers and other telecom equipment.

6. Utilities

Your NCTUE score is referenced when setting up water, gas and electricity, too — especially in areas where these services aren't owned by the local government. Thankfully, rates for utilities are closely regulated and often set directly by state utilities commissions.

However, if you have a low NCTUE score from missing previous utilities payments or other account issues, you may be required to make a deposit before your utilities are set up.

Most states cap deposits roughly at the cost of two billing cycles. According to Electric Rates, a utility expense-tracking site, monthly utilities bills for houses run from $350 to $850.

In other words, a low utilities credit score could mean you need to pay a deposit between $700 to $1,700 to get water, electricity and gas flowing in your home.