Credit can affect every buying decision you make in your life. You need a home, you need a car, and you need insurance for both, but a negative credit score can make it very difficult to obtain those things.
Bad credit can affect your everyday life and take a long time to build back up. The difference between good and bad credit is important to know.
Good Credit vs. Bad Credit
Good credit can help you get a good rate on a credit card, car loan, and more. If you need a place to live, signing a lease is easier when you have good credit. To get good credit, you borrow money and pay it back on time.
Paying off your credit card on time every month can make your credit grow. On the other hand, missing payments or not having the money to pay off your credit card can lead to a negative credit score.
Getting bad credit is very easy. One missed payment will not give you bad credit, but continuous late or missed payments will bring your credit down.
A negative credit score can affect you in more ways than you’d think. Here are 9 ways a negative credit score can affect your life:
1. High-Interest Rates
If you have a negative credit score, you will probably default on a credit card or loan obligation. This makes you a riskier borrower, so creditors will give you a higher interest rate.
You’ll pay more money in interest with bad credits than you would with good credit and a better interest rate.
2. Application Approval
It is up to creditors if they are willing to accept your applications or not. A low credit score can lead to credit and loan applications being denied.
If the risk is too much for the creditor, they will not approve your applications. Home loans especially can be difficult to get when you have a negative credit score.
3. Apartment Approval
Most landlords will check credit before approving a rental application. This is to ensure that the renter will be able to pay their monthly fees.
A negative credit score can make it difficult and sometimes impossible to get approved for an apartment or a house. If a landlord does approve you with a low credit score, you will probably have to make up for it in fees. These fees could include paying a higher security deposit.
4. Security Deposits
When renting out an apartment or buying a home, you will have to pay utility fees along with the renting fees. Utility companies also check your credit score. Utilities you need may include electricity, phone, and cable.
If you have a negative credit score, you may have to pay a security deposit. Even if you have paid utility bills on time in the past, a negative credit score will make these companies trust you less.
If a security deposit is necessary, it will be charged upfront. Once the charge goes through, you can get utility services for monthly fees.
5. Cell Phone Contracts
A low credit score can lead to being denied for a cell phone contract. Most of the major cell phone companies check your credit when you sign up for service. They do this to ensure you will be able to pay your monthly phone bills.
They will tell you they are giving you a month of service so they need to know how reliable you are with monthly payments.
If you have a negative credit score, you could be denied altogether. This could mean the only chance you have is by getting a prepaid cell phone. With this, you can get a month to month contract. This type of contract is usually more expensive.
If you are denied all of these options, you may just have to go without a cell phone at all. If you make payments on your cell phone, you may have to pay more at the beginning of the service. Your payments could also be higher because of your bad credit.
There are jobs out there that require you to have a history of good credit. Jobs can deny you employment because of a negative credit score.
Even just negative items on your credit report can be a reason for why a company won’t hire you. Negative items could include high debt amounts, bankruptcy, or overdue bills.
Employers aren’t technically checking your credit score, just your credit report. They can tell whether your credit is good or bad based on the items on the report. These items could affect your job performance and keep a company from hiring you.
7. Insurance Premiums
If you have a negative credit score, you will be paying higher insurance premiums. Insurance companies will check your credit to figure out if there is a risk. The rate you end up paying for insurance will depend on your credit score.
If you have good credit, your rate will be lower and vis versa. The premium rate can be determined by your credit score and other factors.
8. Starting a Business
If your goal in life is to start your own business, you may be out of luck if you have a negative credit score.
New businesses need help to fund their startup costs. Banks often help new businesses, but if you have bad credit, you won’t receive a loan.
A solid business plan won’t save you here. Bad credits can leave you without loans or a limited amount of money you can borrow.
9. Car Buying
Buying a car may be difficult or even impossible when you have a negative credit score. Banks will check your credit before they give you a car loan.
Banks have the authority to deny you any type of loan. If you do get approved, you will be paying a high-interest rate. This could lead you to pay a higher cost every month.
Don’t Get a Negative Credit Score
If you’ve learned anything from this guide it’s that a negative credit score can be detrimental to your life. It will affect you in multiple areas of your life for years to come.
If you need help building your credit back up, get in touch with The Credit Agents today!