01 Sep 2018

6 Ways A Low Credit Score Can Adversely Affect Your Life

Having good credit is like being healthy, you don’t ever think about it until you lose it. And if you’ve lost it, then there are a lot of different ways it can negatively affect you. You may have had it in the past, or even right now, but chances are something will happen that will send you into the credit dumps. Perhaps it won’t even be your fault, and if you find yourself with bad credit, there are multiple things that could be affected in your life. Let’s take a look at six of them here.

  1. Mortgage: Most of us don’t plop down a bag of cash and say, give me that much home. We go through a pre-qualification process to see what kind of loan we can get approved for and start hunting in that price range. This means that whatever banking institution you go with, they will check your credit score. Bad credit means you could be denied the loan before you even get started, or it could be higher loan rates. The worse your credit is, the higher the risk you look like to the financial institution. This can lead to tens of thousands over the course of the loan.
  2. Car Insurance: The insurance carriers in 47 states will check your credit. They are of the same mindset as the financial institutions. The lower your credit, the riskier you seem. You could have higher than average rates for years if your credit is sub-par, or even be denied coverage. And if you pay your insurance like most people twice a year, every time that due date rolls around you will be that much happier that it isn’t any higher.
  3. Credit Cards:  If you get approved, your rates can range anywhere from 7 to 29.99 percent. A little hint here, credit cards compile interest daily, and it’s compound. With a large balance, this can make the card almost impossible to pay off. This is what the companies are banking on, so if you have to carry a balance, it’s far better to have the lowest possible rate on that card. With good credit you’ll be somewhere between 8 and 19 percent. With bad, it’s 22 and up.
  4. Car Loans:  You’ll most likely get a loan when purchasing a car, and this can be either a pleasant or near-nightmarish process depending on your credit. With great credit you’re considered a tier 1 customer, qualifying you for rates anywhere from 2 to 5 percent depending on your chosen term, but with bad credit you can bet you’ll be upwards of 10 percent. Car loans are installment credit, which means the interest is factored only once a month, but having good credit is still the difference in thousands over the course of the loan.
  5. Job Hunting:  Most jobs, in addition to a background check depending on the job, will also check your credit. Under the Fair Credit Reporting Act they can check it with your written approval (they do not see your score), and if you’re thinking you won’t give consent, you probably don’t need the job that badly.
  6. Cell Phone Plans:  These cell phone plan carriers are like the car insurance folks, they will likely check your credit to see if you’re a safe bet to pay your bills on time.