All of us have financial needs for which people borrow a number of times either from banks or other financial institutions. However, at times got a bad credit score, we are denied loans and we wonder why??
This happens when a person ignores his credits and maximises his credit cards. People stay ignorant to this and pay little attention to the effect it may have on their credit scores. The level of debts and credit card payments have the biggest impact on one’s credit score and if on messes with these, then the credit score will plummet.
“Why is there so much fuss about low credit score,” you might ask. Since a number of businesses, these days judge a person by his/her credit score, having a bad credit will certainly make like extremely difficult. The following are the most common side-effects of bad credit.
- High-interest rates on loans and credit cards: Lenders and creditors consider bad credit applicants as a major risk to their business. Hence, they either deny loan or charge high interest rates so that in case of default the interest rates helps them maintain their stability.
- Loan and credit applications may not be approved: Since the score is low, lenders and creditors think that your bad credit is a risk, they might even deny loan by rejecting your application.
- Landlords may not rent you their apartments: People are not aware of the fact that even landlords check for credit security. It’s true. This situation may leave you homeless or somewhere close to that situation.
- Difficulty in starting the business: A number of people need loans to start their own business. A bad credit history can limit the amount you’re able to borrow to start a new business, even if you have the greatest idea and the data to prove it.
- Difficulty purchasing a car: Banks check your credit before giving you a car loan. With bad credit, you might get denied or you might get approved with a high-interest rate. Most of those “no credit check” car lots charge extremely high-interest rates that make it difficult to make your monthly car payments.Your payments will be. If your credit’s bad, you may have to get a prepaid cell phone, a month-to-month contract where phones are typically more expensive or go without one at all.
- You might get denied for employment: Certain jobs, especially those in upper management or the finance industry, require you to have a good credit history. You can actually be turned down for a job because of negative items on your credit report, especially high debt amounts, bankruptcy, or outstanding bills.
- Higher insurance premiums: Insurance companies check credit too. They say that lower credit scores are linked to higher claims filed. Because of this theory, they check your credit and charge a higher premium to those with lower credit scores, regardless of the number of claims you’ve actually filed.