It’s no secret that bad credit is a personal finance killer. Higher interest rates and lower odds of loan approval are just a couple of the side-effects of having a bad credit score. But did you know that having a poor credit score can also be detrimental to your personal life and even your career?
Here are five ways bad credit could be wreaking havoc on your life, as well as some simple solutions to get your credit score back on track:
1.) Bad credit can kill your odds of owning your dream home
First and foremost, having poor credit can essentially dash your dreams of owning that perfect home. Unless you have a really high income to counter your bad credit, or your partner’s credit is superb, odds are you’ll be paying serious interest on your first mortgage, assuming you’re lucky enough to get approved at all.
The cost of a bad credit score when it comes to interest rates attached to home loans, auto loans and credit cards is hard to quantify. But essentially, it’s a lot. According to MainStreet.com, a consumer with a poor credit score (in this example, 620) can expect to pay two percent more than an applicant with a good credit score (750 or better). Considering that the average national monthly mortgage payment in 2011 was $1,061 (according to RealtorMag) on a 30-year mortgage, that’s a difference of over $20 a month in interest alone. And while that might not seem like a lot, that number inflates to $254.64 per year and over the course of a 30-year mortgage, that’s $7,639.20 more in interest!
So yes, it obviously pays to have a good credit score, and could mean the difference between affording and not affording your dream home, or even getting approved int he first place.
2.) Employer credit checks might keep you unemployed
According to money.cnn.com, one in ten unemployed Americans were denied jobs because of bad credit. As credit checks have become more common in the employee screening process, apparently so have rejections due to poor credit. And unfortunately, it’s a chicken-and-egg situation since bad credit is often a consequence of unemployment.
To combat this issue, it’s important for the recently-unemployed to best prepare for life without a paycheck. This means prioritizing your bills, including credit card bills, medical bills and any other bills that could affect your credit score.
3.) Forget cash back and miles credit cards
If you think you can get approved for the sexiest credit card offers with a poor credit score, think again.
Cash back bonuses, frequent flier miles and 0 percent interest cards are essentially off-limits for bad credit consumers. Not only are you unlikely to get approved for these types of cards, you’re best off not even trying at all since creditors take a hard pull of your profile – the kind of credit pull that will actually do initial harm to your score.
That said, there are credit cards for bad credit available that can help consumers improve their scores with responsible usage each month. Secured credit cards are the preferred category of cards, since their annual fees and interest rates are decidedly lower than unsecured bad credit options. They do require a security deposit upon approval, but there are literally no better credit cards for building credit available to consumers with bad credit scores.
4.) The phone calls…
Anyone with outstanding debt knows that having bad credit can lend to their fear of answering the phone.
Collection agency phone calls are no fun to get, but they’re especially bad when they become constant. A lot of consumers might not know that you can get collection agencies to stop calling you by sending them a stop calling letter, and if they persist then they’re actually in violation of The Fair Debt Collection Practices Act and are liable to up to $1,000 in penalties.
That said, just because the phone calls stop doesn’t mean you no longer owe them. The real way to get collection agencies to quit tying up your phone is to pay back your debts.
One last way your credit score may affect your person life might surprise you…
5.) Nobody wants to date bad credit
The New York Times ran a story last year about the rise in credit score inquiries on first dates. Apparently, it’s become common and almost accepted for a possible love interest to ask about your credit score as early as appetizers, and if your credit is bad than don’t be surprised if the person on the other side of the table splits before dessert.
That’s right – a bad score can even go so far as to keep you single and looking until you get your finances on track.
So yes, bad credit can wreak havoc on all facets of your life if you don’t take action. Again, it’s never too late to make improving your credit score a priority. Your personal life – and your career – might also see a nice improvement once you get the ball rolling on building up your score, too.
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