Side effects of bad credit history



Bad credit history can have many negative consequences. If you have a habit of paying bills after the due date, late fees probably won’t be your only concern. Bad borrowing habits destroy your credit, making it difficult to obtain loans in the future. They can also make it difficult to get a cell phone contract or even get certain jobs. Here are just a few of the possible consequences.

Key findings

  • Poor credit history can make it difficult to get a car and home loan, as well as qualify a credit card account – you may need to start with secured credit card to build your credit.
  • Even if you are offered a loan, it is likely that it will be at a higher interest rate.
  • Consumers with lower credit ratings generally pay more for car insurance, renter insurance, and homeowner insurance.
  • Employers may conduct a credit check before offering you a job, especially if you are applying for a management position or a position that involves money management.

Bad credit means problems getting a loan

It is probably not surprising that banks want to know how likely it is that you will pay them back before granting you a new loan. One of the main ways to make this assessment is to order your credit score from vendors such as FICO as well as VantageScore… These credit rating models use information from your credit reports – from loan balances to payment history – to assess your creditworthiness.

A low score can make it difficult to get a loan, be it a car loan, mortgage, or credit card bill. And if you qualify, you may have to pay higher interest rates to make up for your high rate. normal risk… For example, many credit card issuers require a credit score to be somewhere between good and excellent, which means that the FICO score is at least 670 and the VantageScore is 700 or higher.

If you want to buy a home with a regular loan, you will need a FICO of at least 620. Sometimes borrowers can get FHA mortgage with an estimate of just 500, although you will have to set aside at least 10% and pay for your mortgage insurance, which will increase your overall borrowing costs.

If your loan is less than stellar and you are facing a financial crisis, you may need to urgently borrow money to help you get through the situation. Although credit problems make it difficult to obtain an emergency loan, you can still access a range of emergency loan options


The minimum FICO score required to open a large number of credit card accounts.

Fewer rental options

Homebuyers aren’t the only ones to worry about a spotty credit history. It can haunt you over and over again when you are trying to rent. As with banks, landlords love to assess your ability to pay them on time before handing over the keys to the property. Therefore, they usually receive your credit report as part of the application process.

If you’ve made a few bad borrowing mistakes in the past, finding a new location can be tricky. There are several ways to get around a bad credit history – for example, you can find a collaborator or offer a higher security deposit – but it’s much easier to go with a respectable account.

A good credit history can be just as important for older people as it is for younger people. Medicare does not usually pay for long stays in a nursing home or nursing home, so these institutions rely on private payments. They often conduct a credit check before making a decision to make sure the applicant can pay the bill.

You should always know your credit rating before trying to borrow money.

Higher insurance costs

Here’s something many consumers don’t expect when they accumulate a large credit card bill or fall behind their mortgage: pay higher auto insurance premiums. And yet this is exactly what happens with some insurance companies (although in some states this practice is prohibited).

If you’re wondering why this is the case, it’s because of research showing a correlation between poor credit ratings and the likelihood that drivers will file a claim through their insurance company. The worse your credit is, the more likely you are to have an accident. A report by The Zebra, a 2019 insurance comparison site, found that drivers with poor grades pay more than double that of drivers with exceptional results.

Other types of insurers may also check your credit reports. For example, some tenant and homeowner policies use their own credit rating system to determine your rates. Although life insurance companies generally do not use credit ratings in underwriting process, it can be more difficult to get a policy or get their best rates if you have had a recent bankruptcy.

Payment of a deposit for utilities

Bad credit is often an obstacle when trying to create an account with a utility or internet company. Clients with lower credit ratings may have to pay a deposit before signing up, which acts as insurance in case you don’t pay your bill.

Even connecting with a cellular operator can get a little tricky if you can’t provide a good borrowing history. Some require users with lower credit ratings to use a prepaid plan or make a deposit. You may also have trouble qualifying for better deals on more popular phones.

Difficulty finding a job

The next time you are heading to work, your potential employer may not only ask for a list of references, but also for permission to do a credit check. Why? For specific roles, including leadership positions and money management work– Companies want to know that the person they are hiring can be trusted when making financial decisions.

According to a 2016 CareerBuilder survey, 72% of employers said they conduct a background check on every new hiring, and of these, 29% use a candidate’s credit as part of the appraisal process. A downgraded credit rating can not only cost you money in expensive loans. It can also limit your ability to make money.

The essence

A bad credit history can have far-reaching consequences than you think. A sloppy credit report will not only lead to higher interest rates and fewer loan options; it can also make it difficult to find housing and certain services. In some cases, this can be considered against you when looking for a job. If it has been a long time since you studied your credit report, this might be a good time to see where you stand


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