There’s not many things that can affect your life more than bad credit, which is why it’s important to understand how poor credit affects your life, and that includes more than just financially. Let’s dig in and get a better understanding of how your poor credit can affect your life.
What is Poor Credit?
Most credit scores are based on the FICO scoring system, which is 300-850, with the latter being the highest score (best). So what is a POOR credit score? 580-619 is regarded as ‘poor’, or you could simply say anything below 620. 620-680 would be considered fair and 680-760 is considered good. Anything above that is great credit.
According to Credit.com, the current national average is around 714, although that seems a big high as others list the national average at around 675 or so.
This is the shocker for most people, which is why I listed it first. Bad credit can literally cost you your dream job! It’s true, some employers now check your credit report to get a better understanding of the type of person you are, like how responsible you have been in your financial decisions. No, it’s not illegal, at least in many states, as long as they follow the FCRA requirements. In the past I had bad credit and it kept me from getting a job as a loan officer at a Mortgage company. It was definitely embarrassing.
Having poor credit while attempting to get approved for a mortgage can cost you an arm and a leg. Quite literally. You might want to consider selling one of each once you realize that you’ll pay tens of thousands more in interest over the life of that loan. Having poor credit will also prolong the approval process for most people as it will require more information and time to get approved for the right rates, which are going to be up to the lender, obviously.
If you have good credit it’s fairly easy to get approved for the home of your dreams, as long as you can afford it. If you’re looking to purchase a new home in the near future you might consider fixing your credit report months in advance so that you can have a better chance of saving money and time.
Getting an auto loan will be somewhat similar to the situation with getting a mortgage, if you have bad credit. Many auto dealerships use in-house finance managers that will use corporate or 3rd party financing. For GMC and many other American manufacturers this means you will need well above 600 to get approved for a new car, but even then you can get ripped off with higher rates. Honda and Toyota dealerships make it easier to get financing and will get buyers into cars with much lower credit scores. But, again, be careful about the rates. Having poor credit will still cost you plenty of money over the life of that loan. Thousands and thousands more. It won’t be pretty. I’ve been in this industry and they are sharks.
Even some insurance companies will check your credit, as many believe that people with lower credit scores are much more likely to file a claim than those with good credit scores. According to CBSNews, your bad credit can double your auto insurance premiums. Ouch. This means more money for you to pay out of your pocket due to a credit score that you can fix in just a few short months.
Leasing or renting a new apartment or home can be quite the issue for people with bad credit scores as the landlord/homeowner may decide to check your credit. The same goes for Business people who want to rent/lease a new office space. This can cause you to pay higher deposits.
Credit cards are tough to get approved for unless you have at least fair credit. Even then it’s a bit difficult. That’s not to say you can’t get credit cards with bad credit. It’s just more difficult.
Cell phones/service, electronics, the list goes on. Having poor credit affects your life in many different areas, so it’s best to repair your credit as soon as possible.