The consequences of having a bad credit score include difficulty obtaining a loan, fewer options for renting, higher insurance premiums, limited employment opportunities, high interest rates, and even a limited love life. Basically, bad credit causes you to pay a lot more than people with good credit for the same things, if it doesn’t force you to miss out entirely.
Top Consequences of Having a Bad Credit Score:
Difficulty securing a loan. Depending on the type of loan you're looking for, most lenders want to see credit scores above 640 or 660. If your credit score falls in the bad-credit range (from 300 to 639), your options will be limited.
High interest rates. When you have a bad credit score, you can still get a lot of the same things that people with good credit get, but you'll be charged more in interest for them. For example, for the same new car loan, a person with good credit could qualify for a rate of 5%, while someone with bad credit might have to pay 15%. With personal loans, an individual with bad credit could expect to qualify for an APR of around 30%, while someone with good credit could get an APR of approximately 15%.
Fewer renting options. It makes sense that landlords check your credit score before letting you begin a lease. They want a good indication that you'll pay your rent on time and in full. Unfortunately, a bad credit score can indicate an inability to meet financial obligations, which could cause a landlord to deny your application. You could still secure a lease if you have a friend or family member who could co-sign the lease with you, but landlords generally prefer tenants who can meet payment obligations without a co-signer.
Higher car insurance premiums. A bad credit score can lead to increased insurance premiums since there is a relationship between bad credit and claims filed. On average, insurance premiums for individuals with bad credit are more than two times higher than the premiums for individuals with excellent credit.
Fewer employment opportunities. When you apply for a job, your qualifications will be the most important factor in your potential employer's determination of whether or not to hire you. That being said, when trying to narrow down candidates with similar experience, many employers will look to credit history. Negative items in your credit history (and by extension, a bad credit score) could cause an employer to perceive you as reckless or desperate. Neither quality is desired in a potential employee.
Limited love life. A bad credit score could actually limit your chances of getting married: 49% of people say they would not marry someone with bad credit, according to a WalletHub credit score survey. While getting married does not affect your credit score, many people view a credit score as an indicator of financial responsibility, which in turn speaks to future stability and lifestyle.
If you have bad credit, don't worry. You can follow the personalized credit-improvement advice offered through your free WalletHub account and track your progress with daily updates to your credit score and report.
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