Many people remember turning 18-years-old and starting to get offers for lines of credit. This could have included credit card applications in the mail, being sent information about getting a car loan, or being asked about opening in-store credit card accounts. And while this likely seemed exciting at the time, after drowning under thousands of dollars of debt and not being able to pay your bills, you might quickly realize that buying things off credit can sometimes be more hurtful than helpful. But in order to do things like get a loan or qualify for a credit card, you’re going to want to have a high credit score so you can get the best possible deal for yourself. So to show you just how negative bad credit can be, here are three ways that having bad credit can make your financial life more challenging.
Paying Higher Interest Rates
Once you’ve proven that you’re not a good credit risk, companies that offer credit might begin to give you worse and worse terms for the credit they’re offering you. According to Latoya Irby, a contributor to The Balance, this usually means requiring you to pay a much higher interest rate than those with high credit scores are being offered. This means that when you carry a balance on your account, you’ll be paying a much bigger percentage of your bill to interest than other with lower interest rates are paying.
Credit and Loan Applications Might Fail To Get Approval
In some situations, you might still be able to find someone who will loan money to you or give you a line of credit even if you have a bad credit score. But in order scenarios, you’re likely to find yourself being denied approval for your credit or loan applications. According to Mint.com, most companies who deal in credit or loans see people with low credit scores as a bad risk, meaning there’s more of a chance that you’ll default on your account and not pay back what you’ve borrowed. To protect themselves, they may not even be willing to give you money or credit until you’re able to bring your credit score up.
Trouble Securing Desirable Housing Options
Even if you’re not looking to get a loan or take out a line of credit, there are other reasons why someone might pull your credit score, including when you’re looking for housing. When you fill out a rental application for some type of housing, landlords will usually pull your credit to see if you have a good history of paying your bills. If you don’t, Brian Martucci, a contributor to Money Crashers, shares that you might have a hard time finding desirable housing, as you may only be approved for housing that’s much cheaper or in less desirable areas.
If you have bad credit, consider using the information presented above to see just how this could be negatively impacting your life.