As you are making out your credit cards and ignoring your bills, it might not dawn on you that your credit could be affected. The timeliness of your credit card payments and the amount of debt you are carrying have the biggest impact on your credit score. Mess up in these areas and your credit score will plummet. Moolr took a look at the disadvantages of a bad credit score.
“What is the big deal with a low credit score,” you might ask. Since so many businesses now judge you based on your credit score, having bad credit can make life extremely difficult, from getting a job to getting a place to live. Here are some of the most common side effects of bad credit.
#1 High Interest Rates on Credit Cards and Loans
Credit Scores indicate the likelihood that you will default on a credit card or loan obligation. Having a low credit indicates you are a riskier borrower than someone with a better credit score. Creditors and lenders make you pay for this risk by charging you a higher interest rate.
If you are approved with a bad credit score, you will pay more in interest over time than you would if you had better credit and a better interest rate. The more you borrow, the more you will pay in interest.
#2 Credit and Loan Applications May Not be Approved
Creditors are willing to accept a certain amount of risk. However, if your credit score is too low, they might not want to lend to you at all. With bad credit, you may find that your applications are denied.
#3 Difficulty getting approved for an apartment
Many people don’t realise landlords check credit before approving a rental application. Having bad credit can make it much more difficult to rent an apartment or house. If you find a landlord who will rent to you despite your low credit score, you may have to pay a higher security deposit.
#4 Security Deposits on Utilities
Utility companies – electricity, phone, and cable – check your credit as part of the application process. If you have a bad credit history, you may have to pay a security deposit to establish service in your name.
#5 You Might Get Denied for Employment
Certain jobs, especially those in upper management or the finance industry, require you to have a good credit history. You can actually be turned down for a job because of negative items on your credit report, especially high debt amounts, bankruptcy, or outstanding bills.
Note that employers check your credit report and not your credit score. They are not necessarily checking for bad credit, but for items that could affect your job performance.
