As you increase your credit cards and ignore your accounts, it might not happen that you will affect your credit. The timeliness of credit card payments and the amount of debt you carry has the biggest impact on your credit score. Neglect in these areas and your credit score will decline.
How bad credit affects your life
“What’s the big deal with a low credit score,” you may ask. Given that many businesses now evaluate based on your credit score, bad credit can make life extremely difficult, from getting a job to creating a place to live. Here are some of the most common side effects of bad credit.
01 High interest rates on your credit cards and loans
Credit scores indicate the likelihood that you will default to a credit card or credit obligation. Having a low credit score means that you are a riskier lender than someone with a better credit score. Creditors and lenders make you pay for this risk by charging a higher interest rate.
If you are approved with a bad credit score, you pay more interest over time than you would have if you had better credit and a better interest rate. The more you lend, the more you will pay interest.
How your credit score affects your interest rate
02 Credit and credit applications cannot be approved
Creditors are prepared to accept some risk. However, if your credit score is too low , they may not want to lend you. With bad credit, you may find that your applications have been rejected.
03 Difficulty in approving an apartment
Many people do not realize that the owners check the loan before approving the rental application. Poor credit can make it difficult to rent an apartment or house. If you find an owner to rent to you despite your low credit score, you may need to pay a higher deposit.
How To Rent With Bad Credit
04 Deposit security on utilities
Utilities – electricity, telephone and cable – check your credit as part of the application process. If you have a bad credit history, you may need to pay a secure deposit to establish a service in your name, even if you always paid your utility bills on time. A security deposit will be charged in advance before establishing a service in your name.
05 You cannot get a mobile contract
Mobile companies are also checking your loans. They claim to provide you with monthly service, so they need to know how reliable your payments will be. If your credit is bad, you may need to get a prepaid cellphone, a month-to-month contract where phones are usually more expensive, or go without one.
If you rent or make payments on your mobile phone, you may need to pay more in advance for a new phone or your payments may be higher if you have bad credit.
06 May be denied employment
Certain jobs, especially those in upper management or the financial industry, require you to have a good credit history. In fact, you may be dismissed for work because of the negative items in your credit report, especially high amounts of debt, bankruptcy, or unpaid bills.
Keep in mind that employers are checking your credit report, not your credit score. They don’t necessarily check for bad credit, but for items that can affect your performance.
07 Higher insurance premium
Insurance companies check credit. They claim that lower credit scores are associated with higher reported claims. Because of this, they check your credit and charge a higher premium for those with lower credit values, regardless of the number of claims you actually make.
08 Calls from a debt collector
Bad credit alone does not lead to a debt collection call. However, chances are that if you have bad credit, you also have some debt to collect debt.
Stopping calls for debt collection
09 Difficulty Starting Your Business
Many new businesses need bank loans to finance their startup. Poor credit history can limit the amount you can borrow to start a new business, even if you have a solid business plan and data that supports your business success.
10 Hard to buy a car
Banks check your loan before they give you a car loan. With bad credit, you might get the origins of the car completely. Or, if approved, you’re likely to have a high interest rate, leading to a higher monthly payment, especially if you buy from “no credit check” or a “buy here, pay here” auto deal.