How Poor Credit Affects You

Very few things in life can have a more devastating effect on your lifestyle than a poor credit score. Having low credit scores can cost you hundreds or even thousands of dollars per month.

Your credit score is a number between 300 and 850. The national average is about 675. Credit scores are calculated to reflect how likely you are to pay back loans in a timely manner. A high score indicates a history of handling debt responsibly by making payments on time and not overextending yourself. Lower scores suggest that you have had difficulties paying your loans, so lenders consider you a greater risk.

Here are some of the areas where poor credit can affect you:

Mortgages

If you have a credit score of 720 and above, you will likely be able to receive the best rates on a mortgage or home equity loan. Between 675 and 719 you could end up having to pay up to half a percentage more than someone in the top category. Between 620 and 674, you may need to provide more documentation than those with higher scores and could end up paying as much as 2 percent more than borrowers with excellent credit. Below 620 you’re considered "sub-prime" meaning that you are considered to have less-than-perfect credit and it may be more difficult for you to even find a lender. You could also be charged rates up to 3.5 percent higher than a lender’s best rate, which could mean tens of thousands of dollars in additional interest over the life of your mortgage.

Car Loans

You will more than likely experience the same kinds of difficulties when it comes to getting a car loan. In most cases, you will probably pay between $5,000 and $9,000 more over the life of the loan just for having bad credit.

Insurance

Insurance companies in many states use credit scores to help decide your homeowner and auto premiums. They argue that people with low credit scores are statistically more likely to make claims. Poor credit may result in your having to pay more than other people with similar vehicles and property.

Employment

Bad credit could even prevent you from getting some jobs or getting a promotion at a job you already have. Under U.S. law, potential employers are generally allowed to investigate your credit report in order to help decide whether or not to hire you for a particular position. Laws vary by state but, in general, employers are required to obtain your written consent in order to pull your credit. You may refuse, but you will probably not be hired.

Other areas

Poor credit score can affect other areas of your life as well. Most cell phone companies do credit checks. Some utility companies may require customers with bad credit to pay a deposit when opening a new account. Landlords may even want to check your score (with your consent) before renting an apartment.

Life can be pretty miserable for people with bad credit. If you are someone with bad credit, it’s extremely important that you work on removing damaging information from your reports and rebuild your credit before your apply for a loan.

Check out the sites below to find out how you can repair your credit!

Free Credit Repair
Credit Builders