8 Side Effects of Bad Credit

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Credit is a powerful tool that can be used for a wide range of things. Most of us don’t give much thought to how each swipe of a credit card or signature on a loan document is actually evidence of your integrity as a person. Instead, we think about what we’re going to get with that small and seemingly insignificant action.

A late payment here, an overdraft there and before you know it, you’ve accumulated enough negative points to be declared a credit risk. We don’t realize how valuable credit is until we don’t have it. When that happens, not getting approved for a loan is only the beginning. Below the Personal Money Network has provided 8 side effects of bad credit that you may not have realized can affect you.

1. Difficult to Get Loan Approval
Credit approval is based on your credit score. The lower that number falls the more difficult it will be to find a lender. Even if you do find someone willing to trust you with the loan you requested, you will more than likely be subject to excessive interest rates, which will make it that much more difficult to pay it back.

2. Getting Housing Can be a Challenge
In addition to credit card and bank lenders, landlords also look at your credit before approving you for house or apartment rentals. A poor credit score will likely mean that you can be refused a rental or that you will have to pay a large security deposit in order to secure the housing you need.

3. More Stringent Terms on Approved Loans
Getting a loan with poor credit may be difficult, but it is not impossible. However, when you get the approval you may find that you have to deal with extremely stringent requirements. While no two lenders are exactly the same, expect to jump through a few hoops in order to get out the door. You may have to pay a larger down payment, more for deposits, find a co-signer or meet other terms that those with a higher credit rating won’t have to consider.

4. Pay More to Get Utilities in Your Name
Utility companies also check your credit before installing it in your name. In order to get things like phone, power, gas, or cable you will have to pay a higher security deposit for these services. Even if you have historically paid your utility bills on time, a lower credit score for other bills paid late will still have a negative impact. Expect to pay a higher security deposit up front for these services.

5. Difficulty Getting Security Clearance for a Job
Many jobs now look at your credit to determine if you are worthy enough to work for them. While there is little connection between your credit and job performance this does not stop many employers from looking at your credit anyway. In the USA, at least one out of every four applicants will have their credit checked before they are offered a job.

6. Trouble Getting a Cell Phone Contract
It can be difficult to get a cell phone contract. You may be forced to use one of those smaller pre-paid phones in order to get connected with the rest of the world. Some companies may require you to pay upfront for a new phone or you can expect to pay higher monthly rates if your credit score is too low.

7. You’ll Pay More for Insurance
Whether you’re looking for auto insurance or homeowner’s insurance, your credit will play a huge role in how much premium you will pay. Too much outstanding debt and late payments can make a huge difference in calculating your costs even if you’re buying the same policy as someone with a higher credit score.

8. Difficulty Getting a New Business Started
Most new businesses need a good flow of cash to get started, which most likely will require you to take out a loan. With a poor credit history, the amount of cash you can obtain may be limited, which could make it difficult to get your new business started even with a stellar business plan.

Your credit habits can have an impact on nearly every aspect of your life and it can easily have a negative influence on areas that have absolutely nothing to do with finances. Every negative detail found in your credit report can serve as a painful reminder of mistakes made in the past so it pays to make sure that you do everything you can to correct your credit.