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9 Ways Bad Credit Can Negatively Impact You

July 18, 2016

By: Stacy Yu

A credit rating may only seem like number on paper, however that number can drastically impact how you live.  Typically, good credit is seen as a score higher than 650.  Scores that fall below that number are often considerable unfavorable.  However, if you have a low credit score, how will it affect you?

  1. Difficulty Securing Loans

    When applying for any loan, including a mortgage or auto loan, one of the first pieces of information lenders examine is the applicant's credit score.  A good credit score signals to a lender that the applicant has a solid financial track record and is most likely to pay their bills on time. Those with good credit are more likely to get approved for a loan, while lenders view those with a poor credit as high risk, and opting to loan money to a safer borrower.

  2.  Limited Access to Money

    With the added difficulty of securing a loan comes limited access to money.  For those that live from paycheck to paycheck, this can make keeping up with your finances especially difficult.  A single emergency expense can have devastating effects and put a person at great financial risk.

  3. Higher Interest Rates

    Because those with less desirable credit are often considered higher risk borrowers, they may find themselves paying higher interest rates if they are able to secure a loan.  Those seeking small business loans do have the option of applying for government guaranteed SBA loans, which is designed for those having difficulty securing other loans.

  4. Higher Insurance Premiums

    Lenders are not the only ones looking at credit scores.  So are insurance companies.  Credit scores are not only used to measure financial responsibility, many institutions also use it as an indicator of overall responsible behavior.  So, again, those with low credit ratings are viewed as high risk, resulting in higher insurance premiums.

  5. Higher Down Payments

    One way that wary lenders are able to continue those with lesser credit while minimizing their risk is by requesting a higher down payment.  With a higher down payment, lenders have guaranteed that a greater portion of the loan has been repaid, while still providing a valuable service to the borrower.

  6. Trouble Renting an Apartment or Home

    Landlords like to be paid on time.  So when applying to rent an apartment or house, landlords will typically check the applicant's credit.  If a landlord feels that there is a great risk that rent will not be paid in a timely fashion, they are likely to find another, more tenant.

  7. Barrier to Employment or Security Clearance

    Why would an employer be concerned about your credit rating?  To determine an applicant's level of responsibility and reliability.  Employers want to know that their employees can be depended on, and a good credit rating is quantifiable evidence of an applicant's previous behavior.

  8. Difficulty Securing Cell Phone Contracts

    These days, cell phones are becoming more of a necessity than a luxury.  They can also come with a hefty monthly bill.  Like all businesses, cell phone companies like to be paid.  So, if an applicant looks as if they may not consistently pay their bills on time, the cell phone provider may not approve the applicant's contract request.

  9. Professional Licensing at Risk

    Poor credit not only affects an applicant's ability to secure a business loan.  It also may be a barrier to securing a business license.  Local, state and federal governments like to know that businesses that they license are in good standing and that the business owner is positioned to thrive.  As a result, when it comes to being issued business licenses, those with good credit are more likely to be approved of the license than those with lower credit scores.

If you are have or are at risk of receiving a low credit score, go to 5 Ways to Improve Your Credit Score for tips on how to raise your credit rating.

Have specific questions about your credit report and score?  Don't miss our Unlocking the Secrets to Your Credit Report & Score seminar at your Germantown location! Register here.

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