Navigating the world of personal credit is more difficult for some than others. Even when people are in the position to raise their credit score, there is often a learning curve to climb in order to figure out a strategy to recover. There are things that can help your score and things that are sure to injure it, and knowing the difference can secure your financial health or send you into a downward spiral. When you know just how having a bad credit score impacts your financial life, you can do your best to take the necessary steps toward building and maintaining good financial standing with credit bureaus.
1. Fewer Career Opportunities
If you’ve ever found yourself wondering, “Can you get business loans with bad credit?” you’re not alone. If you’re interested in starting a business and are looking to gain business credit, you’ll first need to use your own credit. Bad credit can make this very difficult, forcing you to explore more tedious methods of funding your business. Entrepreneurs aren’t the only ones who are affected. Many states allow companies to consider a potential employee’s credit report. That means employers can see outstanding balances, student loans, foreclosures, late and missed payments and more.
2. Spending More
Should someone with a bad FICO score obtain a loan, the interest rates will be considerably higher than those with better credit scores. That means that the cost of the loan will be higher. This would apply to a car loan, personal loan or home loan. You’ll also likely pay more for auto and home insurance since most American insurers can factor in your financial habits in their risk assessment of you. And when it comes to utility companies, you may find that you have to pay a higher deposit when securing connectivity.
3. Delay Retirement
Most people are looking forward to the day when they can retire. But when your credit is not in good standing, you are more likely to retire later than those with better credit. It’s difficult to build wealth and credit simultaneously. To pay less interest, it may be better to consider a balance transfer credit card. This will allow you to pay down existing debt more quickly and for less money. Having less debt at retirement age is going to ensure that retirement is a real option and won’t have to be put off.
Many property management companies check potential renters’ credit scores. In general, they’re looking for a score that is 620 and above. The last thing they want to do is rent to someone who won’t be able to pay the rent on time and consistently. Bad credit holders need a cosigner on their lease, or they will have to pay a higher security deposit.
5. Fewer Lender Options
Mainstream lenders like Visa and Discover are less likely to embark upon a financial relationship with individuals with bad credit. So when you’re in a tight spot and need some money up front, you’ll only have access to predatory lenders like pawn shops and payday loans with interest rates that could be 400% or more.
It’s true that life is a little sweeter for those who have good credit, but if bad credit is an issue for you or someone you know, there are ways to lessen the strain on your financial life. Knowing the consequences is both an incentive and a deterrent. Be as fiscally responsible as you can. And don’t be afraid to reach out for help to learn healthy and responsible financial habits.