Outlines how a bad credit score can impact on your business operations and restrict your chances of success.
Your credit history and score are two important things individuals should keep track of in order to make big purchases and get approved for credit cards and loans of all kinds. If you haven’t been monitoring or managing your credit score, it could worsen over time if bills go unpaid or credit cards are maxed out. Late payments are factored into these numbers as well, so paying everything on time is highly recommended.
If there is any reason you fall behind on payments or accrue debts, they can impact your credit more than you imagine. There are numerous consequences of having a poor credit score that many are not aware of, which leads to difficulties in the future.
5 impacts of a bad credit score
Let’s discuss the 5 worst negative consequences of a bad credit score.
High interest rates
Your credit score in an indicator of how likely an individual is to default on loans and financial obligations. When your credit score is on the low side, lenders are taking on more risk by approving applications and credit lines. To even the playing field, creditors will often charge high interest rates.
High interest rates can mean paying even more for financial assistance than you bargained for. Getting a loan that you can pay back easily and on-time is one way to counteract high interest rates, keeping you from digging yourself into a deeper financial hole.
Low approval rates
Lenders take on a risk when approving individuals for loans, but they are only willing to take on a certain amount. Individuals with a low credit score may find themselves less likely to be approved for credit cards and other loans, further impacting your score negatively.
However, you may be able to get approved for a personal loan regardless of your credit on websites like https://letmebank.com/loans-for-bad-credit-with-monthly-payments/, which typically have low approval requirements benefitting individuals with bad credit. Before entering into any agreements, though, it is recommended that you do adequate research and know exactly what you’re getting into when receiving a loan that works with your credit score.
Security deposits
Moving into a new apartment or home requires individuals to set up their own utilities with various companies. Electricity, cable, phone, and internet companies look at the credit of applicants and use this information to approve or deny services. In many cases, bad credit leads to a security deposit being required.
Even if you have paid utility bills in a timely manner in the past, having poor credit history means you are more of a risk to the company. Security deposits must be paid before services will be provided and an account can be created in your name.
Employment denials
It may seem unbelievable that potential employers perform a bad credit score check during their screening process, but this is the reality for many companies. Certain job roles, especially leadership roles, require candidates with a good credit history. This means that before applying for a job, you may need to take note of your credit report.
Your actual score will likely not be used to determine your candidacy, though your credit history is tied to your score so a low score could indicate poor credit history. Any items that could impact or indicate your performance on the job will be assessed.
Difficulties entering contracts
Many people don’t realize just how many things in life require a credit check. Landlords, phone companies, utilities, and even employers perform credit checks to ensure that they are entering into a contract with a financially responsible, dependable individual.
A bad credit score makes renting a home or apartment difficult, as landlords will be less willing to work with you if you have a poor credit score. Cell phone companies may also perform a credit check, which may result in getting a month-to-month contract or a prepaid cell phone instead of a 2-year plan or a brand new phone. You may also have to pay more upfront costs, such as a down payment or deductible, which further complicates the process of getting a new home, phone, car, or utilities.
What is a good credit score?
The score ranges from 0 to 1000 points . The closer to 1000, the better your score and the more likely you are to have access to the credit you need.
Typically, the market ranks as follows:
– 0 to 300 points: Low, with high risk of default
– 300 to 700 points : medium risk
– 700 to 1000 points: high, low risk of default and high probability of getting credit.
People with a score below 400 need to find ways to increase their score, if they want to take out a loan, for example. Due to the high risk, financial companies understand that it is very likely that this consumer will not pay or will delay the payment of installments and this is not well regarded by the market.
Conclusion
Your credit score may seem like a bunch of random numbers at first, but these numbers can make a large difference in your capabilities and how easy it is to get approved for loans, hired by employers, and enter into contracts. Bad credit can affect interest rates, housing approvals, security deposits, getting a new phone, and more. By monitoring your credit, you can take measures to raise your score, improving your chances of getting all that you want in life.
