While it is common to think about ways to improve your credit – it is also just as important to understand how having bad credit can impact you and the future of your finances. By being aware of how a low credit score can affect your entire financial situation, you can be even more pro-active and effective in correcting the situation or even avoiding being in this position in the first place.
Here are some of the costs of bad credit and how it can influence the future course of your financial reality:
Difficulty Being Approved for a Loan
It is likely that you may have already heard of this first financial reality – however it can actually prove to be a bit more of a struggle to get a loan than you would have even imagined. Essentially, the lower your credit score, the more challenging it can be to find a lender willing to grant you additional credit.
While it is also true that there are many more bad credit loan opportunities these days than before – and getting a loan through specific lenders and bad credit companies is more possible – it is also true that there may be some added hoops to jump through to get you there. Therefore, taking steps to boost your credit or keep it in better shape is definitely worth while.
Higher Loan Interest Rates & Less Term Flexibility
On the occasions that you are approved for a loan, another downside of having a loan while having a bad credit score is that your loan may come with a higher interest rate and the terms may also be less favourable. The amount of credit you are approved for may also be less than what you would like as lenders include these restrictions in order to protect their side of the agreement – and to also be sure you can pay back the loan.
As you can see – having good credit can help you obtain more flexible terms, a better interest rate can help you save money in the long run, as well as even a higher balance that can help you achieve your important financial acquisitions.
Prevent you from Renting an Apartment
In certain cases, landlords may want to perform a credit check on their renters to make sure they can afford to pay monthly rent. With bad credit of course, this may deter landlords from approval of potential renters. As you also may already know, late payments can be directly linked to bad credit scores and if consistent monthly payments are a typical pattern or behaviour associated with a potential renter, a landlord may then be too wary too take them on as a tenant. Again, stabilizing your credit score is a good step to take to make sure you can successfully rent an apartment, if this indeed is apart of your future plans.
Approved for Higher Insurance Premiums
Regardless of which type of insurance you require, it may very well be that insurers will take into account your bad credit. Whether you are opting for car insurance or home insurance, if you have a low credit score it may lead to higher insurance premiums. Just as bad credit loans may mean higher interest, the same can be said for bad credit auto loans, and so on. If for example, If you were to walk into the financier with solid credit then you may be able to stroll out with a decent interest rate. Unfortunately again, with poor credit this is not likely to be the case. Instead on top of a higher auto loan interest rate, you are also likely to attract a high insurance premium that can lead to a more expensive monthly payment over time.
All in all, having bad credit can lead to some sticky situations when it comes to trying to obtain financing, as well as a variety of other financial scenarios. Furthermore, since your specific credit score reflects your overall credit borrowing profile – this makes a significant case for staying on top of your monthly payments and all-around credit behaviours.
Ultimately, with a more stable credit performance, you may be surprised just how many more open doors become available to you. In the mean time, you can explore bad credit loans – however should also always keep looking for ways to re-establish your credit score and improve your finances for the better.