Results of Bad Credit
Late fees likely won’t be your only problem if you’re in the habit of paying your bills after the due date. Poor borrowing habits erode your credit, leading to higher interest rates and trouble to qualify for loans. A low credit score can even prevent you from getting a job.
Credit is necessary because it is one-factor lenders look at when considering a loan.
Reasons Why Poor Credit is Bad
Poor credit ratings may make it harder for you to get automobile and home loans. To qualify for credit card accounts, you might be required to use a secured credit card to build your credit rating. If you are offered a loan, the interest rate will be higher. Consumers with lower credit scores tend to have higher auto, housing, and homeowner’s insurance rates. Employers might run a credit check on prospective employees.
Bad Credit? You May Have Trouble Getting a Loan
It probably doesn’t come as a surprise that before handing you a new loan, banks want to know your likelihood of repaying them. They make that assessment by studying your credit score using systems such as FICO and VantageScore. These credit-scoring procedures use information from the reports in your credit accounts for loan balances to payment histories to check your score.
If your credit is not stellar and you require an emergency loan, a quick option might be to seek short-term financing. With less-than-stellar credit, obtaining an emergency loan may be difficult. However, you can still consider options such as bridge loans, refinancing, or merchant cash alternatives.
Fewer renting options: What does this mean for you?
It’s not just home buyers who need to worry about their credit history. It can come back to bite you when it comes time to rent as well. As with financial institutions, landlords will be even happier to give you the keys to a property if they can confirm your ability to pay them on time. They will often check your credit during this period. If you made some late payments on your loans, you could count on your credit later being affected.
You’ll want to know your credit score before obtaining any loan.
Bad credit has consequences that may be far worse than you might have thought, so you should not dismiss your credit history lightly. An unsatisfactory credit report can drive your interest rates and make securing loans and housing more challenging. An alarming account could cause potential employers to question your qualification for specific jobs. It’s helpful to review your financial history from time to time.