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Consequences of Bad Credit
Consumer use of
credit has steadily
increased over the past decade. Unfortunately, incomes have not kept pace with
these growing levels of credit related spending. This trend has
resulted in record levels of personal bankruptcies, as well as high
levels of late payments, skipped payments and even foreclosures. All of
these factors have worked together to produce one very
negative effect: damaged credit. Tens of thousands of people across the country are now being forced
to deal with the consequences.
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Most people simply do not
realize how important a solid credit rating can be until they no
longer have it. This realization is typically brought about by
ramifications that begin to appear in an individual’s life. Listed
below are a few of these negative results.
- Credit or lending denial.
A poor credit rating significantly reduces the chance that an
individual will be approved for a credit card or loan. This can
affect mortgages, car loans, personal loans or lines of
credit.
- High rates. If an
individual with damaged credit is approved for a card or loan, it
is generally at a very high rate of interest. Lenders view these
individuals as “high risk” clients and therefore they charge
higher interest to offset that risk. Over the course of a loan
this can translate into hundreds or thousands of
dollars.
- Insurance denial. Some
life insurance companies will turn down individual’s with bad
credit.
Increased fees and charges. Lenders often tack on
additional fees and charges to bad credit borrowers.
- Difficulty obtaining a
job. Some employers will view a copy of an applicant’s credit
report as part of the screening process. A bad rating would
seriously diminish a candidate’s chance for receiving the
position.
- Housing problems.
Individuals who have submitted a rental or leasing application for
an apartment, condo, or house will often be subjected to a credit
search. Negative results often lead to a rejection of the
application.
- Anxiety. Many people who
have poor credit are scared of all the potentially harmful
consequences. Additionally, there is often a sense of deep guilt
and remorse.
The consequences of bad
credit can be quite significant. They often affect an individual’s
financial life, as well as, employment and housing opportunities. If
your credit habits are threatening to damage your report, then the
time to act is now! Do not wait until these repercussions begin to
appear before addressing the issue.
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