Your credit rating is important for your financial health. With a bad credit score, you will be subjected to high interest rates whenever you take a loan or borrow. It may also affect your expenses such as insurance, the result? Unfortunately subjecting you to higher rates! Finally, bad credit may also hinder you from getting a job. Employers perceive individuals who can’t manage their finances as being irresponsible. This sounds unfair, right? It is however a fact and you should strive to ensure your credit is in good shape. This post looks at the cost of living with bad credit.
Mortgage Interest Rates
If you have bad credit and are in the market for a home loan, you will definitely pay more in finance in finance charges. According to credit scoring firms, people whose score fall in the range of 770-840 will pay about $1,400 per month for a home valued at about $300,000 at a rate of 4%. On the other hand, if your score ranges between 600 to 640, you will pay about $300 more monthly for the same home at a rate of 6%. If the mortgage is to last for thirty years, you will have paid over $100,000 more than someone with a higher rating.
Home insurers just as car insurance will review your credit rating. Insurers use credit based scores where it is perceived a risk classification factor. If you have a very low credit score be sure that your home insurance will be high.
A low credit score can cost you a job. Employers these days look at the credit scores of all job applicants. A low credit score may just scare away your prospective employer and make it difficult for you to get a job.
Certain federal workers and enlisted personnel are expected to maintain good scores to get various government clearances. Bad credit may affect government employees or military personnel when seeking career advancements or promotions.
Financial stress may lead to muscle tension, headaches, sleepless nights, and other maladies. Research indicates that worrying about financial issues may negatively affect someone brain since such distractions make one lose focus.
Credit Card Options
To apply for a credit card, you will be subjected to a credit check. If you have a low credit score, banks are likely to offer your credit cards at interest rates that are above average. Extremely low credit scores may even result in interest rates above twenty percent. If you have suffered a foreclosure or bankruptcy, you’re only option will be a “secured” credit card. With a secured credit card, you will be expected to make a deposit with your lender to assure them that you’ll pay.
Name and Reputation
Having bad credit with financial institutions is one thing, but if your repayment record is bad, you may develop a bad reputation with friends and family. Perhaps you take longer to repay a loan or you borrow money and don’t pay back. If that description fits you, it may be difficult to convince people to help you during financial emergencies.
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