The Costs of Bad Credit
A credit score is a numerical representation on the credit-worthiness of an individual, which is based on a level analysis of a person’s credit files. A credit score, ranging from 300 to 850 with 850 as the highest score, of a borrower is produced by financing companies with a Social Security number using data from the person’s previous credit history, while lenders use a credit score to evaluate the probability that a person repays his debts. The borrower’s personal finances and his capacity to borrow are affected by credit scores and if you’re not performing well with your credit score, which means you’ve got bad credit, the following effects are bound to impact you.
Difficulty borrowing money
Getting a low credit score will directly affect your likelihood of securing approval for a new loan or a credit application or less likely find a willing lender. If your score is 698 and the qualified score is 700, it just shows that even if your score is almost close to the cut off score level, you will have difficulty borrowing for a new loan, because many lenders don’t make loans where the credit score falls below the accepted level.
Money lenders and financing companies are relying a lot on a borrower’s credit scores such that when a borrower’s credit score is a few points way below the qualified score, his chances of borrowing may be slim but if he gets his loan approved, he will be confronted with a higher rate and with additional restrictive terms from the lenders or financing institutions. An interest rate difference can add tens of thousands of dollars to the total cost of a mortgage, depending on how the loan is structured, but the same principle applies to auto loans, home improvement loans, personal loans, and credit cards.
Trouble renting an apartment
Credit score rating is subject to the kind of apartment unit that is open for lease, such that if you’re applying to rent an apartment and your credit score is high, landlords can accommodate you to well-kept, modern apartments in a desirable neighborhood, but if your credit score is low, landlords may be lenient to the credit score but will offer you a substandard dwelling unit in an undesirable area and, at the same time, the landlord will most likely require a pre-lease credit check.
Difficulty to find jobs
If you’re looking for a job, there’s a high probability that your credit status will be checked by the company you are applying to, most especially if the position you are applying requires a security clearance. Even if the practice of hiring an applicant requires a credit status check is banned or restricted in a handful of states in the US, still it doesn’t stop employers from doing the checking rounds because ideally an employee can work efficiently if there are no distressing factors, which he/she is carrying, one of which is a bad credit.
Stress on personal relationships
The status of your credit score and your credit overall profile can also affect your personal relationship and family life in a manner when you and your spouse will apply for either a home loan or auto loan, since lenders look at both you and your spouse’s credit profiles and assess your household’s overall credit risk. The strain from high interest rate, large down payment which are results of low credit qualification is also affecting your family relationships, since financial issues are stressful to the well-being of a person.
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