No one sets out to achieve a bad credit score, but once it happens, the burden of creditors calling and never feeling financially secure can create a lot of stress and anxiety in your life. The far-reaching consequences of a poor score can significantly lower your standard of living and ability to confidently work and live.
Make sure you’re taking your credit seriously. Here are five ways a bad credit score is to your detriment.
- Getting a Loan: You might find that it’s much more difficult to get approved for a loan. When you have a low credit score, lenders view you as high risk and are less likely to take a chance and approve your loan. This means that lenders may be unwilling to give you the loan to purchase that dream house you have your eye on.
- Renting an Apartment: Finding home and hearth can be equally as difficult when you’re looking to rent an apartment. Landlords will run a credit check on you before approving a lease, and if your credit score is poor, they’re likely to assume you’ll default on a payment and less likely to rent to you.
- High-interest rates: It may seem unfair that those who struggle the most to pay their debts are also often faced with the highest interest rates, but it’s the harsh reality. Lenders for auto loans, mortgages, and credit cards will make you pay the price for poor credit by charging you higher interest rates, which over time can cost you thousands.
- Higher insurance premiums: Many insurance companies apply a credit-based insurance score when evaluating your premiums. The theory is the lower a person’s credit score is, the more claims they will end up filing. If you have a low credit score, the insurance company will most likely charge you higher insurance premiums.
- Getting a job: While potential employers don’t access your actual credit score, they can get a look at all those behaviors—lines of credit, missed payments, foreclosures, outstanding balances—that may have led to your poor credit score by asking for access to your credit report. If they believe you’re irresponsible in your financial life, especially when applying for jobs in the financial sector, you might get eliminated from their pool of prospective candidates.
The number one place to start repairing your credit is to pay your bills on time. On-time payments account for 35% of your credit score in the FICO formula. That’s why a debt management program and credit counseling services are so important.
With a debt management plan, credit counselors can work with lenders to lower your interest rates and consolidate your loans into one affordable monthly payment, so that you can pay your debt down in three to five years and ultimately raise your credit score. It’s time to improve your credit – get started today!