Like it or not, credit plays an important role in everyday life. Whether you want to be approved for a mortgage, car loan, or credit card, your credit score will play an important role. Those with higher credit are more likely to have better financial options, such as access to low interest loans or reward credit cards with premium benefits. Having a low credit score can be a barrier to these opportunities. Keep reading to find out how a bad credit score can make your life worse.
1. Low credit can limit your rental opportunities
As a tenant, your options may be limited if your credit rating is low. Many landlords and rental companies require potential tenants to submit to a background check. This usually means that they will perform a credit check to see if you have a satisfactory credit history.
Landlords will be less likely to rent to someone who may seem unable to pay their rent quickly, which they assess in part through a credit check. If you have a low score or negative credit scores, you may not be approved.
2. You may have trouble finding a job
Believe it or not, some employers perform background and credit checks during the hiring process. If you have poor credit, this can limit your job prospects. Employers in some industries want to hire employees who they believe are both financially stable and trustworthy with sensitive information. This can mean that they choose to ignore applicants with low credit.
Here are some examples of industries that can perform a credit check on applicants:
- Law enforcement
- Temporary jobs
- Your credit may affect your ability to get a mortgage
3. Your Credit May Affect Your Ability To Get A Mortgage
If you want to take out a mortgage, you need to be in good financial health. For starters, mortgage lenders want to make sure that you have enough income to pay off your loan. They will also review your credit report and credit score to make sure you’re ready for this life-changing financial decision.
Your credit score and your credit situation will determine if you are approved for a home loan. In addition, it will have an impact on the type of loan and the terms that you can get. If you are thinking about buying a home in the future, now is a good time to start working on improving your credit.
4. Your loans may have higher interest rates
If you can get a car loan or a home loan with poor credit, your loan terms may not be as desirable as you would like. You could be stuck signing a loan with a higher interest rate. This means that you will pay more interest for the life of your loan. Due to the high interest rates on some loans, having bad credit can get very expensive.
5. You may need to delay your life goals
Depending on your credit situation, you may need to delay some of your life goals. If you have a low score, you can also have a lot of debt. If so, it may make more sense to focus on paying off your debt as quickly as possible instead of taking out new loans. It could mean waiting for your other goals, like saving for a car down payment or setting aside extra funds for your future marriage.
Improving your credit is possible
Having low credit is stressful and can negatively impact your life. But you can work on improving it. Make a plan to increase your score and pay off all unpaid debts.
Here are some tools to get started:
- Credit Card Interest Calculator: Find out how long it will take you to pay off your credit card debt within a specified time frame, and see how much total interest you’ll pay.
- Budget overview: If you need to create a budget but don’t know where to start, this guide can help you get started.
- Increase Your Credit Score Guide: Learn how to make changes to improve your credit score and reduce your debt.
- Best Debt Repayment Apps: These can help you manage your debt repayment strategy with the convenience of mobile tracking, planning, and reminder tools.
With hard work and a plan, you can improve a low credit score. For more helpful financial advice, check out these personal finance resources.