A poor credit score is a status that many avoid at all costs, but some people find it hard to do so. According to Experian, around 16% of Americans have poor credit scores, while 17% hold a fair score. It means many people still don’t understand the importance of a good credit record.
If you are one of the 16% or 17% of the American population with a poor to fair credit score, you must know the side effects it can bring you. That’s why we have created a list of the five biggest side effects that a poor credit score can give you.
Loans Become Expensive For You
A common misconception of having a bad credit score is that you can’t acquire a loan. On the contrary, there are loans no credit check online, which allows you to obtain a loan with a bad credit score. However, you must know that getting a loan with a bad credit score can be risky.
Lenders will charge you a higher interest rate in exchange for lending you money despite having a bad credit record. A bad credit score is equivalent to a poor financial reputation, meaning lenders are risking by lending you money.
They don’t know whether you can pay the loan, given your poor credit score. Checking the loan applicant’s credit score is the lender’s way to protect their business. If you need extra cash and resort to acquiring a loan, expect a huge interest rate.
A Higher Car Insurance Cost
Aside from facing an expensive loan cost, having a bad credit score can also mean you need to pay higher car insurance costs. Health and life insurance providers won’t check your credit score. However, car insurance companies will examine your credit score and use the data they acquire to decide whether to charge you a higher premium or not.
The reason behind this is that insurance companies have found various studies that mentioned drivers with bad credit scores as the ones likely to file claims. It means these kinds of drivers are considered high-risk and more costly to insure than those with good credit standings.
Insurance companies will impose insurance rates according to how high of a risk you are. A bad credit score indicates that a person is a high risk for the company. Thus, your insurance rate will also increase.
If you’re wondering why you have a higher car interest premium than your peers, you might want to check your credit score because it’s likely to be the reason.
Having Fewer Renting Options
You might have already known that credit score also impacts your chance to buy a home. But the side effect doesn’t end there. Even renters who have a bad credit score experience some disadvantages.
Landlords are now using a person’s credit score to gauge their capability to pay rent on time. Therefore, expect that they will check your credit score as a part of the application process. So, if you have a bad credit score, you’ll experience difficulty finding a good place to rent.
However, there are ways you can increase your chances of getting approved for rent. All you need to do is find someone with a good credit score to cosign your rental agreement or offer a higher deposit.
Affects Employment Opportunities
Another negative impact of having a bad credit score is missing huge employment opportunities. If you have a bad credit standing, employers will see you as irresponsible and lacking financial skills. Therefore, it automatically labels you as a liability to the company.
This side effect will even be more significant if you’re applying for a financial position in a company. The company owner will not entrust you with the business’s money if you have a bad credit score.
Your trustworthiness will decline, which means fewer job opportunities for you. Therefore, when you apply for a job, expect the employer to look into your credit record and decide whether to hire you according to your score.
Difficulty In Applying For Utilities
Utility companies, including internet providers, will also examine your credit score during your application. They do this for the same reason mentioned above: to know your capability to pay on time.
Once these companies see that you have a bad credit score, they can impose a deposit charge before approving your application. And this deposit charge can be expensive. You may also be required to write a guarantee letter that acts as a guarantor or co-signer agreement if you fail to pay your bills on time.
A credit score is indeed a huge deal in our lives. It mustn’t be neglected because of its negative impact on our ability to acquire daily necessities, such as having a decent home with utilities and getting a good-paying job. That’s why you must start building your credit score today to avoid the inconveniences mentioned above.