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Your credit score might seem nothing more than a snapshot of your financial habits – but it can actually impact several aspects of your life.
In this guide, you’ll find everything you need to know about the problems that a bad credit score can cause. And, more importantly, how to fix them!
You Might Not Be Able To Access Your Preferred Credit Card
If you have a poor credit score, you’ll soon find out that your preferred credit card options are not accessible to you.
Since you’ll appear as a riskier and less reliable borrower in the eyes of your credit card issuer, you might only be able to access selected credit cards, which usually come with reduced credit limits, high-interest rates, and no rewards.
- Fix it: If none of the options available fit your needs, consider going back to a secured credit card to start rebuilding your credit score.
Mortgage and Loan Options Might Be Limited
For mortgage providers, the minimum viable credit score candidates should have is 620, while you might need a FICO score of at least 720 to access a personal loan. Even if you are able to borrow with a low credit score, you might face whopping interest rates and APRs, which will impact your finances for years to come.
- Fix it: If you require a loan and can’t tap into your savings, you still have some options to choose from. For example, you can get a personal loan without a credit check, resort to cash advances, as friends and family, or check if VA and FHA loans are available to you.
Not All Utility Companies Will be Accessible to You
In the eyes of utility companies, a poor credit score is an indicator that a user has a track record of late or missed payments. In turn, you might be asked to provide additional documents or pay higher fees to gain access to utilities such as gas, electricity, or even the Internet.
- Fix it: if you are denied a contract, working with a co-signer and presenting a guarantor letter can help you regain access to utilities. And, don’t forget that keeping up with your utility bills can help your credit score!
It Costs a LOT to Borrow Money
If you are looking to borrow money and you are shopping around for the best APR and interest rates, there is one golden rule to remember: costs go up as your credit score go down.
For example, a user with a credit score in the 720-850 bracket might be able to access an average loan interest rate of 10.73%–12.50%, while someone with a score in the 300–629 range will have to deal with exorbitant rates of 28.50%–32.00%!
- Fix it: Shop around for the best deals – and refinance your loan as soon as your credit score improves!
You Might Find It Hard To Finance Your Business
Finding ways to finance a business is always difficult, but it is even more so if you don’t have a good personal credit history! Your personal credit score can leak into your business’s finances, thus hindering your chances of securing a small business loan.
- Fix it: Consider alternative funding options, including seeking the support of friends and family, pitching your idea to angel investors and venture capitalists, launching a crowdfunding campaign, or bootstrapping your business.
It Might Cause You To Miss Out on Your Dream Apartment
Most lenders today carry out background and credit checks on their prospective tenants. In particular, this rule applies to larger property management companies with multiple apartments for rent and strict eligibility requirements.
- Fix it: Consider working with a local or independent landlord and take advantage of more lenient tenant vetting processes.
Securing Your Dream Job Might Be All The More Difficult
If you are looking to advance your career, your poor credit score can represent a significant hurdle. Today, over 92% of employers carry out background checks as part of their hiring process and nearly a quarter of them also carry out credit checks, especially for jobs that require security clearance for money handling.
- Fix it: If your poor credit score is preventing you from accessing your preferred job position, consider choosing an entry role that involves fewer responsibilities at first.
The majority of insurers take into consideration several factors when calculating your premium, including your credit score. If you have a poor or insufficient credit history, your auto and homeowner’s insurance costs might increase by 28-110% depending on your provider.
- Fix it: Consider choosing an insurer that provides coverage with no credit check. Alternatively, you can reduce fees and access discounts by prepaying your six-month policy premium.
The All-in-One Solution: Focus on Rebuilding Your Credit Score
As seen above, a bad credit score can cause a cascade of consequences, which can make it harder to navigate daily challenges such as finding an apartment, getting a job, or paying your utility bills.
The tips above can work great as short-term fixes, but to rebuild your financial stability, the only thing to do is to start rebuilding your credit score. If you are unsure how to get started, partnering with a credit counselor or working with a financial advisor can help!
