Bad credit scores are a nightmare to even think about, let alone experience. But sometimes, people underestimate just how much a bad credit score can affect your life in different circumstances. Bad credit affects your home insurance premiums, job interviews, and future loan applications if you aren’t careful. Most businesses and establishments verify your credit report before offering you credit services and loans. Hence, it is essential to maintain your credit score or derive a plan to fix it quickly if it is lower than required.
Here are 6 more reasons to help you understand just how damaging a bad credit can be to you and your financial situation:
1. Debt collectors’ harassment
Fixing your bad credit means repaying all your loans, credit card bills, and other debts. Once you miss paying your installments or make late payments, the debt collectors will constantly send emails, texts, and calls to remind you of the same. It is not a pleasant experience if you are already dealing with financial struggles. To avoid this scenario, write to all your lenders individually, requesting to stop those calls and payment reminders.
2. Credit limits and interest rates
If someone has an excellent credit report, then lenders tend to offer them better repayment terms & conditions. Even today, some lenders offer lower interest rates and higher credit limits to someone with impressive credit than to someone with a low credit score. If you have a bad credit score and are in financial trouble, you can ask your credit card lenders to increase your credit limit. But the chances are that your request will get rejected. Your bad credit score makes you a credit risk, a liability most lenders don’t want.
3. Relying on your spouse’s or family’s credit card
If your loan applications are being rejected because of a bad credit score and you are struggling with money, you could be forced to ask your spouse or family members to apply for the loan. Not only will this take you on a guilt trip, but if the repayments aren’t made on time, your family will also suffer from bad credit history. Another option is to get a co-signer loan, in which another person will be responsible for the loan repayment in case you fail to do so. Both options are rather last-ditch efforts and should be avoided if you can.
4. Buying a house or renting an apartment
Every American has a dream of buying their own house. Bad credit scores can and will keep you away from this dream. Mortgage and home loans are impossible to get approved for if you have a bad credit score. Moreover, even apartment renters ask to check your credit report to ensure you will indeed be able to pay the security deposit and make the monthly payments on time. Fixing your credit will increase your chances of getting approved for home loans.
5. Job interviews
Government institutions, finance sectors, and banks check your credit score to determine whether you are a good fit for their organization. If you are currently unemployed and are looking for a job in one of these sectors, you will be better off having a good credit score. A bad credit score can also delay the promotion you had been trying hard for.
6. High-security deposits
Utility service providers check your credit before providing their services to you. You will be required to pay a high-security deposit to balance out the chance that you may default. Paying off all the monthly bills will give you that security deposit back. However, having a good credit score will mean you don’t have to pay the security deposit.
Now that you know how a low or bad credit score can affect your life, you should consciously monitor your credit scores. Monitoring your credit can also help you build a big-picture scenario to understand how your finances are faring. We hope this helps you in maintaining a good credit score.