The Real Effects of Bad Credit

The Real Effects of Bad Credit
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Well, by now you have likely heard a lot about bad credit and what it can mean for you and your ability to access a loan. More specifically, what you have likely heard is that with a bad credit score it can be more challenging to get this additional credit when you need it the most.

Sure this is a strong enough reason for looking at taking that step to improving your credit score, however there are also many more elements of your life that bad credit can negatively impact. With that being said, here are the real effects of bad credit.

 
Bad Credit Can Mean Little to No Disposable Income
The reality of it is, when you have a lot of debt and in turn bad credit, a large portion of your income is likely to be tied up paying off all of this debt. With limited income, this can affect your ability to live your life the way you want and this can mean having to go without some of the finer things in life, as well as even having to cut down on some of the things that would actually help you improve your life.

This lack of access to the money you need can also prove difficult in the event you need some emergency income and yet you find yourself without these funds and you aren’t able to obtain a loan to help with your financial needs. Furthermore, you may find a vicious debt cycle will continue on to follow with no end in sight.
Bad Credit Can Mean Trouble When Renting an Apartment

 

While it does depend on the renting situation, many times however, landlords will require that potential renters undergo a credit check. Landlords need to know that renters will be able to keep up with their rent payments, so as well as employment history, and pay stubs, a renter’s credit score will also play a factor in their ability to successfully rent an apartment.

Therefore, in the case of poor credit, in the end your tenant application could be rejected and as a result you could miss out on a comfortable place to live.

 
Bad Credit Can Mean Difficulty Securing a Car Loan/Buying a Car
As already mentioned, having bad credit can be a huge barrier to obtaining the loans we need, and this also pertains to car loans. If you find you are in need of a car, with a poor credit score, finding vehicle financing – while albeit not impossible will definitely be more of a struggle.

Ultimately, being in this position may mean that you need to hold off on getting that car, and this whole process may require that you have to jump through a lot more hoops to secure the loan and purchase your car when all is said and done.

 
Bad Credit Can Mean Steeper Interest Rates
To follow up on the difficulty associated with obtaining loans in the first place, in those instances where you can secure the credit, it is more likely that you will be given a higher interest rate. Like landlords, lenders also need to know that borrowers can pay back the loan and what level of risk they possess.

So as such, the higher interest rate in this case is the ‘insurance’ the lenders need to be able to lend the money to borrowers who’s credit history may make them a higher risk in terms of paying back the loan successfully.

All in all, having bad credit means that you are more likely to pay more in interest over time compare to other borrowers.

 
Bad Credit Can Mean Relationship Issues & Personal Stress

 

Lastly, having bad credit can mean that you will also have the added burden of stress in your life. Financial issues can place stress on not only your life, however they can also cause problems within your relationships. Whether you are setting goals together or personal goals for the future, having a poor credit score can hinder these advancements and this can be a reason for strain and conflict in certain cases.

When it comes down to it, having less stress is better than a lot and of course having less debt is better than having a lot. Therefore, reducing your debt and your stress together can improve your life and alleviate certain tensions that can arise in present and future relationships.

Overall, the message here is, if you want to move forward in many aspects of your life, you need to have certain financial freedoms – freedoms that bad credit doesn’t typically allow for. As you can see, a bad debt situation can lead to a long list of problems that you want to try and steer as clear from as possible and the real effects of bad credit can be both long lasting and diverse.

 

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