A good credit score gives you access to premium credit cards, superior loan products, and better interest rates. A bad credit score, however, means you often pay higher interest rates on mortgages, loans and credit cards.
Accounts that have fallen behind on payments for more than 30 days stay on your credit report for at least seven years. Here are some side-effects you may experience if you have a bad credit score.
- You're a risk for lenders
If you have a bad credit score, you are more of a risk to lenders than someone with a high credit score. Banks have high standards for determining who qualifies for lending.
A bad credit score means your access to funding from banks and other traditional institutions may be limited or non-existent. If you're approved for a loan, you are likely to have to pay a high interest rate, which leads to a higher monthly payment.
If you're looking for lenders for quick cash, Personal Money Network is a good resource. It doesn't matter if you have bad credit and it has lenders throughout the country who offer multiple products. The time between application and funding is much shorter than the time it takes to get a bank loan.
- You may find it hard to rent an apartment and get utilities accounts
According to reports, a credit score of 620 is the least you will need to be able to rent an apartment. If your score is 700 or higher, you should have no difficulty. It is not impossible to rent an apartment if you have bad credit but you may have to pay a security deposit or find a co-signer before you sign a lease.
Utility companies don't give you an account without doing a background check. If you have poor credit, they can charge a deposit or you may need to submit a letter of guarantee which acts like a co-signer agreement if you fall behind on bills. Some states have protection against termination of your access to public utilities, like gas, heat, water and electricity.
- You won't have access to the best rewards credit cards
When you have a good credit score, you can make use of cash-back incentives and other offers available. Some of the higher tier credit cards offer cash-back on streaming services, dining or entertainment. They may offer special invitations to exclusive event pre-sales or concerts.
New cardholders may be able to earn a one-time cash-back if they purchase a certain amount within the first three months. You don't have access to any of this if you have a poor credit score.
- Your insurance premiums will be higher
Insurance companies often look at your credit score. Their credit-based insurance scores determine how much you have to pay. Typically, the worse your credit, the more you have to pay and the better your credit, the less you pay. However, there are a number of other factors that also come into play when assessing what you pay besides your credit score.
- You delay building wealth
Bad credit has a long-term impact on your financial stability. It means you will pay more interest and put more money into servicing debt that into assets and equity.
By lowering your debt to credit ratio, your credit score improves. Refinancing your mortgage or auto loans could shave off some interest and you could put that money towards retirement instead. Remember that your credit score will go up organically if you stop adding more debt and pay your bills on time.