5 Potential Disasters Caused by a Bad Credit Score
A bad credit score equals bad news for your financial life. A credit score, also known as a FICO score, is a three digit numerical number that determines your creditworthiness. This is an important number because it can play a huge role in determining whether you’ll be approved for a variety of big purchases. Everything from a car loan to that nice apartment, will all require looking at your credit.
Below we take a look at 5 major consequences of having a bad credit score along with helpful solutions to get it back in good standing.
A Bad Credit Score May Spell Trouble When it comes to Your Job Prospects
Certain types of jobs require a credit check as a part of their hiring process. This is usually done in order to determine how responsible you are and if you have any financial habits that may jeopardize the company. Jobs that you can expect to perform a credit check include any career in finance, management and recruitment. Make sure you are making all your payments on time if you’re worried about your credit score.
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 each month. 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.
Mortgages are the only way to go for the majority of people looking to own a home. A bad credit score could make it difficult to secure a mortgage. If you are approved for one, you can expect to receive a high interest rate. This in turn can put a strain on your finances. A great way of getting a good mortgage rate is to put down more money than expected as a down payment. This effectively shows the mortgage provider that you have the finances to make good on your monthly payments. Alternatively, you could look into non-conventional home loans such as those provided by the Federal Housing Administration. Lastly, 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 get with your car loan. In fact, you can expect to pay more than the average person on the same car. On top of that, your insurance premiums may be based on your credit score.
A low credit score can affect your health. Because of your negative financial habits, you might not be able to get certain elective procedures done because your insurance may not cover them.
If you need help with managing your finances, consider speaking to a personal finance planner. They can help you make a plan and if you manage to stay on track, this will help open you up to better financial opportunities in the future.