Have you neglected your credit score? Read on to learn about the side effects of bad credit scores (and why you should work on yours).
Your credit score is way lower than you’d like it to be.
No big deal, right? It doesn’t affect your everyday life…
Wrong. Bad credit can creep its way into many facets of your life, and keep you from living the lifestyle you want.
And we know, just reading that sentence isn’t enough to convince you of how important it is to fix your bad credit score.
That’s why we created this post. It’s a rundown of the many ways that bad credit scores can negatively affect your life, and why it’s a good idea to improve yours as soon as possible!
Want to learn more? Keep reading!
How Did I Get Here?
Getting credit is often the easy part. Credit card companies, for example, are eager to get you using their credit to pay for things.
It’s that second part, paying them back what you owe, that often becomes an issue.
We get so accustomed to using credit to pay for things that it becomes almost second nature to have an ever-increasing balance on credit cards.
And the bad news is that if your credit cards are getting maxed out and your bills are going unpaid, you are also driving your credit score lower and lower.
Now, this isn’t to say that people who have credit issues are bad or irresponsible.
Often, people who have unpaid bills or maxed credit cards are in that situation because of things out of their control. Sometimes they can simply take out bad credit loans to right the ship. But often that’s not the case.
And unfortunately, bad luck doesn’t get taken into account when your credit score is assessed.
Give Me A Call Sometime
Let’s start small, with something like getting a new phone. It might seem like a simple purchase on the surface.
But phone contracts are still contracts. And companies are very hesitant to sign longer-term contracts that involve regular payments with people who are seen as less likely to pay. Which translates to people with bad credit.
And while you could still go with a phone that’s on a pay-as-you-go plan, you should also expect to pay a lot more for the phone itself.
So, right away, we can see that bad credit puts a damper on your everyday life. And this will only continue unless you find ways to manage credit successfully.
Hire Me, Please
Okay, so let’s assume you went ahead and bought that more expensive phone with a pay-as-you-go plan. You’re gonna need a decent paying job to pay for it, right?
Well, here’s the thing. While employers can’t legally decide not to hire you based on your poor credit, they are allowed to look at your credit report.
And often, they will. They want to get a sense of how responsible they think you are because that trait will extend to the way you perform at your job.
So, if you have bad credit, they might not grant you an interview. Or they might not hire you.
They’ll never say it was because of your bad credit, but if you are otherwise worthy of an interview and can’t get one, credit might have been an issue.
New Apartment Blues
Let’s say you do get hired, despite your bad credit, and you end up needing a new apartment that’s closer to the new job.
Not so fast. Just like potential employers, potential landlords will definitely, if not always, check your credit. If they are going to be relying on you to pay the monthly rent, they definitely want to know if your credit score is good.
And again, while they won’t come out and say they denied your request because of your bad credit, it happens all the time.
And if you can find a landlord who is more lenient with bad credit scores, it probably translates to a higher rent for you, or at least a higher initial deposit.
Buying a House
So, let’s say you do manage to get that phone paid off, get hired for that new job, and get an apartment near it. That’s already very impressive given your bad credit!
But if you managed to get this far, it won’t be long before you’re looking to potentially buy a house. Maybe you’ve met the love of your life and are looking to start a family.
So you start looking, find a couple of potential places, and reach out to get pre-approved for a housing loan.
Not so fast. Having bad credit makes getting approved for a loan nearly impossible, especially in the post-housing-bubble era. Subprime borrowing was all the rage for a while, but now banks are much more careful.
So, simply getting a loan will be the first huge hurdle if you have bad credit.
But, even if you managed to get approved, expect the interest rate to be less than ideal. And over the life of a mortgage, every fraction of a percent in interest makes a huge difference in your overall cost.
For example, you’ll end up paying double the amount on a 15-year loan if your interest rate raised by 3%.
And in addition to a higher interest rate, you’ll be required to have mortgage insurance on your home as well. This is because even banks that lend to people with bad credit want to have some assurances against people not paying.
Mortgage insurance can mean an addition to your monthly mortgage payment of hundreds of dollars. And insurance companies, just like landlords and banks, are less likely to accept you as a customer if they think you are going to be risky.
So you might be out of luck simply because they won’t take you on!
Bad Credit Scores Need Fixing
Hopefully, this has given you a sense of what bad credit scores can do to you, and why it’s so important to improve it.
Fortunately, there are ways to improve your credit score over time. It takes discipline and commitment, but it will be worth it in the end!
If you have questions or want to learn more about ways to fix your credit, check out this blog post on raising it!