How important is a Credit Score for your day-to-day life in the U.S.?
Banking Basics

How important is a Credit Score for your day-to-day life in the U.S.?


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Spoiler Alert! Long story short, it is super important. In this article, we delve deep into how your credit score impacts nearly every aspect of your life in the U.S. and how you can build a good credit score.

You must have heard the buzz around credit score or FICO score, and believe us - This is not overhyped. A credit score is really the defining factor of your financial future in the U.S. It impacts the cost of living - better the score, lower the cost of living, and vice versa. Your financial history can affect how easily you get loans, get rented accommodation, make big-ticket purchases, and even get job offers. When you apply even for a phone connection, your credit score is checked, and your creditworthiness and risk in lending are evaluated (i.e., likelihood of you paying back). So, a credit score is a crucial part of your life in the U.S.

Strings attached | U.S. credit score & interest rate

To make it more intuitive, we bring you a simple illustration. Assume that you take a 15-year fixed loan of $100,000. The table below shows the interest rates (APR or annual percentage rate) that you’ll get based on your credit score. For each scenario, we have calculated the monthly payment and total interest you will have to pay.

FICO Score

Annual percentage rate (APR)

Monthly Payment

Total Interest Paid


1.986 %




2.209 %




2.387 %




2.602 %




3.035 %




3.584 %



Disclaimer: These are interest rates as of 6th Jun’21

Suppose you are buying car insurance. It is like a line of credit to you, so before giving out the insurance, the company will check your credit score to assess how fiscally responsible you are, and based on that the policy rates will be determined.

A person with a lower credit score is considered to be a risky borrower and hence they are charged higher interest rates by adding what we call “risk premium”. While a person with a good credit score is considered to be less risky and hence the banks and other financial institutions are willing to extend credit at lower interest rates as well. So, that’s how your credit score becomes particularly important. It affects not only the personal but also the professional aspect of your life. A very clear funda that we learn here is that: To save money, you need to build a good credit score.

Check out:

10 Things You Can Do to Build Your U.S. Credit Score

Credit Cards 101 For Indian Students In The US

The image below shows the relationship between your credit score and the APR you get.

How a good U.S. credit score can help you in the long run

Having a good U.S. credit score gives you better financial credibility in the eyes of lenders and hence they are willing to lend you money at lesser interest rates, so you can borrow money affordably and then payback. As a matter of fact, other factors like your wealth, assets, existing debts, etc. also play a role in the calculation of the interest rate you get but credit score is the most widely used and tangible indicator. The best thing is that this one metric is totally in our control. It is in your hands how responsibly you manage your finances and pay back debts in a timely manner.

  • Want health insurance? Or Car insurance? Or home insurance? Any insurance for that matter. The premium you pay is directly dependent upon your U.S. credit score. A good score will get you a lower premium and that is a direct money-saving.
  • Want a credit card? Well here as well your credit score impacts the APR you get.
  • Looking for a job in your dream company? Some companies check your credit score before offering you a job.
  • Lower interest rates on loans. A good credit score fetches you lower interest rates. So, the amount you need to pay back for borrowing money is also lower.
  • Higher bargaining power: Financial institutions line up to give the best offers to customers with a good credit score. So it is in your hands to handpick the offers that suit you the most and save money.
  • Saving on security deposits on utilities[1]: Getting utility services like electricity, phone connection, water, gas, etc. is like getting credit. If you have bad credit you may have to pay a security deposit to get access to these utility services in the U.S.

To get a better interest rate, you can spend a few months working to raise your credit score. Zolve provides you access to a credit card from Day 1 and hence you can start building your credit score as soon as you land in the U.S.