“You know what, my friend? I hate to say this, but I don’t think I can rent out this apartment to you. Maybe you should check elsewhere.”
Standing there in astonishment, Martin quizzed the landlord, “But I have all the documents you requested. Or you think I’m gonna owe you? I work two shifts; I’m always going to pay my rent.”
The agitated man responded, “Really. Well, your credit history begs to differ. I can see in your profile you have a bad credit score. I’m sorry, I can’t take the risk.”
Ooops, and on and on, Martin toiled before he could get someone to let him an apartment.
Such is the extent to which bad credits affect people.
Read on to find out about other possible consequences of living with bad credit.
- Heavy interest
- Difficulty obtaining loans
- Extra charges
- Difficulty renting
- Difficulty getting a job
- Family impact
- Higher insurance
Once a credit card company or a lender sees you have bad credit, they assume right away you’re a risky borrower. As such, they try to make up for the risk they’re taking on you by charging you a hefty interest rate.
For example, if regular borrowers were getting 5%, 10% interest charge, a lender might choose to charge you 30%.
Imagine having to pay double of what others are paying because you have lower credit than the standard. That’s really catastrophic.
Click here to see a list of credit repair companies that can potentially help you sort your credit score today.
At least in #1 above, you’re still going to be approved for credits and loans. In some pretty harsh scenarios, you may struggle to find any credit company or lender that’s willing to fund you.
Usually, this happens when your credit is far below a particular mark.
To avoid this, strive to pay your bills, debt, loans, and credit cards as at when due. If you’ve lost the plot, and your credit now reads red, find a good credit repair company to help you out.
It won’t matter whether you’ve always paid your utility bills on time; if a utility company – phone, cable, electricity, gas – sees that you have bad credit, they may decide to charge you something called a “security deposit” before establishing any service in your name.
The reason for this is because the companies fear your creditworthiness. So, they’re taking an insurance against your name.
We already established this reality in the intro section of this post. Strange as it may sound, some landlords actually take their time to check the credit history of anyone applying to rent their property.
The logic behind this reasoning is that if someone has a terrible credit score, chances are they’ll default on their rent payments in the future.
Hence, it’s better not to rent out your property to someone with bad credit in the first place.
Another side effect of having bad credit is you might struggle to land your dream job.
This is particularly true for people seeking jobs in fields like insurance, management, banking, finance, government, etc.
Once an employer spots a red flag on your credit report, they get a bad impression about you and feel you might be too big a risk to employ. As such, they turn down your application, even though it beats those of the other applicants.
Having a bad credit today and failing to fix it might put your family (if you currently have one) or future family under great financial strains.
For example, let’s say you’re trying to apply for a mortgage with your wife, and the lender spots that one of you has bad credit (lenders check the credit report of the two parties), they may then deny your application, put you on stress, or impose heavy interest charges on you.
The same may hold for future couples, too. That is, the bad credit dent on someone’s report today might put a strain on the chances of their future family (they and their partner) getting financial aids.
It is well-documented that in some states in the US, if you have bad credit, you’ll be charged a higher insurance premium.
According to the National Association of Insurance Commissioners, “most states permit auto and homeowners insurance companies to factor credit into their policy decisions in states that don’t explicitly forbid this practice.”
By and large, the lower your credit, the higher the insurance premiums you’ll pay.