5 Potential Disasters Caused by a Bad Credit Score
A credit score, also known as a FICO score, is a three digit numerical number that highlights your spending and borrowing habits as it relates to credit. This is an important number that you need to guard with your life because it can play a huge role in determining whether you’ll be approved for a car loan, that nice apartment you’ve been eyeing and more. In this post, we’ll take a look at 5 major consequences of having a bad credit score as well as offer helpful solutions to get it back to a good number.
A Bad Credit Score May Spell Trouble When it comes to Your Job Prospects
Certain types of jobs as well as states require a credit check that you need to approve before being offered a job. This is usually done in order to determine how responsible you are and if you have any financial habits that may jeopardize the company that you work for going forward. Jobs that you can expect to have a credit check on include any career in finance, management and recruitment. If you’re worried about your credit score affecting your job prospects, start fixing the issue by trying to make minimum payments on a consistent manner a few months or a year before thinking about going for that dream job you’ve been eyeing.
It’s important to note that in most states, a prospective employer is barred from examining your credit report unless they have a signed waiver authorizing them. You should also let a would-be employer about any adverse events that were out of your control which may have affected you credit score in the past (the 2008 economic crash comes to mind here).
Higher Credit Card Interest Charges
Banks often view individuals who have a bad credit score as high risk. This is because these kinds of people are more likely to miss monthly payments or pay just the minimum over a given amount of time. In order to protect themselves, financial institutions will up credit card charges for these individuals to protect themselves. This basically means you may pay hundreds of dollars more compared to another person with the same credit card, money that you would have put to good use elsewhere.
A great way of keeping your credit card charges low even with a bad credit score is to get a credit rebuilding card. On top of that, you could go through your credit report and dispute any errors that you may find. Alternatively, you can automate bill paying so that your financial behavior is kept consistent over a long period of time. Lastly, request credit reports from all three major credit reports and read everything to get a better understanding of what’s contained in them so you can make better decisions going forward.
Most of us dream of owning homes; mortgages are the only way to go for the majority of would-be owners. A bad credit score could possibly lead to you being denied a mortgage or having your premiums raised by your bank. This in turn can put a strain on your finances on a month-to-month basis. A great way of getting a good mortgage rate is to put down more money than expected as down payment. This effectively shows the mortgage provider that you have the needed liquidity to make monthly payments now and in the future. Alternatively, you could look into non-conventional home loans such as those provided by the Federal Housing Administration. Lastly, please speak to a home ownership counselor such as those provided by HOPE NOW and HomeFree USA for expert advice on what your options are when it comes to getting a home loan with a bad credit score.
Applying for Car Insurance
A car is a vital part of modern life for most Americans. A bad credit score can negatively impact the APR you’re required to pay on your car in monthly installments. In fact, you can expect to pay more than the average person on the same car due to a less-than-perfect credit score. On top of that, the premiums you pay on your car on a month-to-month basis may be based on your credit report if you apply for insurance. The companies that do this usually state that they do this because they get a lot more claims being filed by individuals with low credit scores.
Let’s face it; nobody’s perfect. Everyone is allowed a skeleton or two in their closets, as long as it’s not a bad credit score. Research done by Federal Reserve Economists Jane Dokko and Geng Li found that people tended to hook up and get into relationships with people whose credit scores closely resembled theirs. They also found that getting together with someone whose credit score was stellar didn’t improve the other’s score.
It’s common knowledge that the number one reason why marriages break up has to do with finances. A bad credit score is usually symptomatic of bad spending habits and lack of discipline, attributes which may spill over into relationships, causing major strains and eventual breakups. As a rule of thumb, you want to surreptitiously carry out basic research or ask questions that can help you determine a potential partner’s credit habits and score before making a commitment.
A low credit score can affect your health; you might not be able to get certain elective procedures done because your insurance may not cover it owing to your not being able to make consistent monthly payments on your credit card payments, mortgages and any other loans you might have taken out.
If you find that you’re having a hard time maintaining your credit score, consider speaking to a personal finance planner who can help you create a plan that you can stick to for a set amount of time in order to turn the tide on your score so it can open you up to better financial opportunities and in the future.