Good credit: 4 crucial areas where you need it

While I find the notion of chasing the 800 credit score misguided, it is nevertheless a necessary evil today.

We live in a credit-driven society and some may even ask, why is credit necessary? It isn't. There are many people living off the credit grid and do so happily. In some ways, yes, we can avoid the need to have good credit or credit at all -- but these four areas are crucial for those of us who do depend on credit to open certain doors.

1. Job

Some positions require applicants to go through a credit check. Employers want to make sure that you're not in a position to be bribed due to burdening debt or to make certain that you are of good moral character. Several debts that have been charged off with no payments can be a red flag to employers, indicating irresponsibility or low moral character. Financial positions and those working in or related to the government are often a target of such employment-based credit inquiries. Most applicants find this an intrusive but necessary evil for getting a job to pay the bills -- a crucial reason for having good credit.

2. Renting

Your landlord ultimately wants to know that you won't stiff her on the rent. When checking your credit landlords are looking to make sure that you don't have any evictions or judgements that could impact your ability to pay the rent. Needless to mention, if you were in a position where you were sued for non-payment of rent, this may raise eyebrows and result in a denial. If you want to avoid couch surfing, then you'll want to make sure your credit is in good shape.

3. Insurance

Believe it or not, your insurance rates are in large part determined by your credit score. This was a surprise to me a few years ago when I renewed my auto insurance and also secured home owner's insurance. Insurance companies want to know that you will be able to make the premium payments each month. Their rate is, in part, determined by their verification through your credit report that you're able to make the payments on time. Lower credit scores mean high risk and result in higher payments.

4. Home ownership

This is a no-brainer as the home-buying process is largely determined by your credit rating. If you have shoddy credit, then you can expect to be denied on a mortgage application or given a usurious rate if approved. High mortgage rates cost you several hundred more dollars in the end so it's best to get your credit in top shape before pushing any mortgage applications through. This is a crucial area for many people because they still hold tightly to the American dream of buying a home, though it isn't a necessary factor to their survival. Still, renting a home or apartment comes with the same requirement -- that you have decent credit.

The lesson? Check your credit and keep up with any changes to avoid surprises later.