THE IMPACT OF BAD CREDIT Impact of Bad Credit While it’s well known that a lower credit score will affect your mortgage rate, and even your ability to obtain a mortgage, it is not always clear what other impacts there are. For example, car buying becomes more expensive; the lower your score, the higher your interest rate. Same holds true for credit cards, for home equity lines of credit and loans, furniture and appliance purchases, and so on. What is often less known is that bad credit can prevent someone from obtaining a job.The rationale may not be self evident, but it likely has to do with bad credit habits reflecting poorly on your ability to succeed in the workplace. This may not be the case at all, since bad credit can be caused by many things, but it can be used to deny employment. Insurance is another area where bad credit has a major impact; a low score can affect your home and auto premiums in a big way. The logic seems to be that someone who neglects to pay his bills may also neglect to replace the squeaky brakes, or repair the sodden drywall, and claims will be higher. Numerous studies have shown that people with lower credit scores file more claims, so insurers feel justified in using this as a criterion. Neglecting your credit can be costly, and the sooner you get it back on track, the sooner you’ll begin saving really big money. If you don’t know your score, find out, and begin fixing those items costing you money. Remember, a $80.00 collection for mobile phone service or fitness club membership can cost you many times that in foregone good interest rates and terms. |