5 Ways Bad Credit Affects Your Life, and What to Do About It
Unfortunately, bad credit affects much more than getting a credit card or a bank loan. Bad credit can make life difficult on a personal level and make business goals feel out of reach. If neglected for too long, it can even leave you jobless and homeless. The following list includes 5 ways bad credit affects your life, along with tips on what you can do to reverse this situation.
1. It leads to higher rates and restrictive terms
Being approved for a business loan when your credit is less than stellar is a huge victory. However, even if you can secure funding, it will more than likely involve an unfavorable interest rate or restrictive terms. These higher interest rates also mean higher finance charges on your credit card balances, personal loans, home improvement loans and auto loans.
2. It could prevent you from getting the home you really want
Depending on the loan structure, bad credit can also add tens of thousands of dollars to the total cost of a mortgage. If you are applying for an apartment lease, the landlord will run your credit (unless local laws forbid the practice). It is understandable that a landlord would want to check an applicants credit, since a lower credit score means timely rent payments is unlikely. Landlords will be hesitant or turn you away if he or she discovers a history of late payments, delinquencies or foreclosures.
3. It raises the price of bills
Banks and landlords are not the only ones that will be wary of your bad credit situation. Companies you do business with – cellphone providers, insurers, utility companies, etc. – will also worry about your credit score. In their eyes, bad credit makes you seem untrustworthy, and leads to them charging you fees or high rates.
4. It makes it hard to get a job
While there are a few states that forbid or restrict employers from checking potential employees credit scores (e.g. Connecticut and Illinois), job applicants should expect a credit check. A survey by Demos, a think tank that focuses on consumer finance issues, found that one in four job applicants have had their credit run. In addition, one in seven were told that they were denied a job because of their bad credit situation.
5. It can hurt your relationships
Bad credit can put a tremendous strain on the relationships that matter most to you. While your credit score does not merge with your spouse’s, it can still directly affect them. When applying for a home loan or an auto loan together, your credit score will affect your ability to be approved. Worst case scenario, if your personal information is used by your spouse (or vice versa) because they cannot qualify on their own, both of your credit scores will suffer – leading to a lot of tension and consequences.
So how can you work on improving your credit score, in both your personal and business life? Start by using comprehensive credit tracking tools. As you work hard to pay your bills on time, these tools’ features will allow you to daily monitor your progress. You can also consider getting a merchant account with bad credit. The advantage of working with a high-risk provider is that your business can secure business funding and credit card processing, while also rebuilding your credit score.
Author Bio: Electronic payments expert Blair Thomas co-founded eMerchantBroker, serving both traditional and high-risk merchants. His passions include producing music, and traveling to far off exotic places.