9 Ways: What Can Bad Credit Do to You? Whats The Consequences?
Having bad credit can give you a headache. If your credit score isn’t exactly stellar, it could leave you paying higher interest rates on credit cards, mortgages, and other lines of credit.
That bad credit score you’re putting around may even disqualify you from certain private student loans.
So, what can bad credit do to you? As you can already imagine, quite a lot. But the consequences of having bad credit might be more than you think.
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How Can a Bad Credit Score Affect My Life?
Bad credit can get in the way of almost every financial decision you make. Here are just a few ways a terrible credit score can affect your financial future:
1. You’ll Have to Pay Higher Interest Rates on Car Loans
People with bad credit will have to pay higher interest rates on car loans, no matter how much they’re borrowing. In some cases, these high car loan rates can be the same as a credit card, boarding rates of 17 percent or higher. And over the course of 48, 60, or 72 months, that could mean paying thousands more on just interest alone.
2. Constant Calls from Debt Collectors
The odds are that if you have bad credit, you have more than a few debts in collection. These collection agencies that now are responsible for your debts can call at all hours of the day. They’ll request that the debt is paid either in full or in payments.
If the debt is massive and delinquent enough, they may even pursue legal action. If that happens, you can expect calls from collectors and financial lawyers, too.
3. You May Not Be Able to Start a Business
A bad credit score can hinder your ability to start your own business. Your bad credit score may mean you’ll have issues securing the funds you need to get started.
4. You’ll Have a Hard Time Finding an Apartment
Landlords will likely run a credit score on all applicants to judge. This will give the landlord a sense of how likely they are to make rent on a regular basis.
So, it should go without saying that a bad credit score won’t boast too well with future apartment complexes. This bad credit score might mean you’ll have to put more down for a security deposit.
It’s also worth mentioning that your bad credit could be a deciding factor in your apartment application. If you and another individual are wanting to rent the same unit, the one with the higher credit score will likely be chosen.
5. You Could Be Denied Private Student Loans
When private student loan lenders look at your credit, they’ll use your credit score to determine your interest rate. But, if your score is bad enough, they might deny you the loan altogether.
6. You Could Have to Put Down Money For a Security Deposits on Utilities
Your bad credit score means that you’ll be considered a “financial liability" to many utility companies.
Because of the risk, you face them, you’ll have to put down a “security deposit” to show that you intend to pay your balances.
Also, security deposits don't go toward future payments either. They’re usually returned only when the account closes.
7. You’ll See Higher Insurance Premiums
Insurance companies will check your credit before giving you a quote. If your score sits low on the FICO score, it means you’re a financial liability to them.
Because of this liability factor, your premiums could be spiked above average. Even if you haven’t filled many claims in the past, you could be subject to pay more.
8. You’ll Need a Cosigner on Your Loans
Because your credit score is pretty bad, many lenders may ask you for a cosigner. Should you fall flat on your commitment to pay the debt, responsibility for it then falls on the cosigner.
9You May or May Not be Approved for that Mortgage
Mortgage companies take into account your credit score when they decided whether to approve your loan request. Generally speaking, low credit scores mean you’ll have to pay higher interest rates. However, if you score is below 580, you may not even be approved for the mortgage at all.
How Do I Raise My Credit Score?
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A good credit score will make your life more comfortable in a variety of ways. For one, you’ll save money on interest rates and increase the likelihood of being approved for a loan. Here are a few things to do to help improve your credit score:
- Pay your bills on time and in full.
- Pay off past debts from collection agencies and other financial firms.
- Keep your available credit line above 50 percent.
- Check your credit report regularly to see how your spending habits are affecting it.
- Fix any mistakes on your credit report.
- Be careful not to allow too many hard pulls on your score.
- Apply for more lines of credit to increase your credit line.
- By doing the tasks mentioned above, you can help rebuild your credit score starting today.
- Learn How Credit Repair Services Work
Related: Is Pay To Delete Legal?
Don’t Let Your Bad Credit Ruin Your Life
Thankfully, you can increase your credit score. So, don’t get down on life just because your credit score sits in the low 600s or 500s.
By adopting a few credit building practices, you can get your score up to the 700s in no time at all.
Start fixing your bad credit today and enjoy a brighter financial future tomorrow.