Many people don’t realize the importance of having good credit until they get bad credit. If you have bad credit, then you know all to well that bad credit makes life difficult, to say the least.
With bad credit, you’ll have trouble getting approved for new credit cards and loans. When you are approved, you may have to pay higher interest rates than if you had a better credit score. Higher interest rates mean you pay more for the cost of borrowing money. You can avoid the impact of a high interest rate credit card by paying your balance in full each month. It’s not to easy with a loan since the interest is included in each monthly payment.
Unfortunately, you might find that your applications for credit cards and loans are being denied. The lender is required to let you know why your application was turned down and you can use that information to help improve your credit score.
When you make an application for new utility service, cell phone service, and other types of monthly services, the service provider may require you to pay a security deposit. You won’t be able to establish service if you can’t afford to pay the security deposit. You’ll typically get the deposit back after a certain number of timely payments or after you turn off the service, but it’s an outflow of cash that could have been avoided with a better credit score.
Some employers use credit as one of the criteria when they’re choosing a new employee. Unfortunately, bad credit could cause you to be unemployed. An employment credit check won’t come as a surprise. The employer must get your permission before pulling your credit report. You can use that as an opportunity to explain any credit mistakes before the prospective employer sees your credit report.
Insurance companies use credit scores to help price insurance premiums. They say there is a relationship between credit scores and claims filed. If you have bad credit, you can end up paying a higher insurance premium than someone with the same driving history and a better credit score.