How Does Having Bad Credit Affect Me?

Good credit - it means many different things. There are a number of advantages to having good credit; these are pretty obvious. While getting and maintaining good credit involves a high degree of fiscal discipline and making payments, it is well worth the effort. So how does bad credit affect you? What are the disadvantages of having bad credit? This is a question which it takes more than a few words to answer.

Lenders and credit card companies use what is called a FICO score to decide if you are eligible for any kind of financing. A score which is 720 or above is considered to be excellent and will enable you to qualify for nearly any kind of loan you request. A score of 650 or lower is when you may begin to face difficulty.

It is the “big three” credit reporting agencies who calculate your credit score. These companies are Equifax, TransUnion and Experian.

Financing opportunities A bad FICO score will prevent you from obtaining financing in every market. Try obtaining a mortgage to buy a house and you will be hard pressed to get that loan. The same thing applies to personal loans and car loans. Basically, a bad credit history tells lenders that you are a high risk and can’t be trusted or are otherwise unable to pay the loan back in a timely manner.

Interest rates The hardest part of having a bad credit history is the much higher interest rates you will pay.

Your interest rate will largely be determined by your FICO score. A good score will secure you low interest rates; 7% to 9%. However, having a bad credit history means that while you may still be able to get financing, you will be paying a much higher interest rate.

I had one experience where I was trying to consolidate a few bills into one payment. My credit score wasn’t what it should have been and my interest would have moved from 11% toget ready for this24.99% per annum. That is an astronomical rate of interest and you will end up paying $25 per $100 of your annual ending balance. On a balance of $1000, that adds up to $250 a year!

Personal health and well being The financial ramifications of having bad credit are bad enough, but there are other things to consider. If you have bead credit, you are probably already in debt. You may be getting mail from creditors or even harassing phone calls from collectors. This creates stress and strain on even the hardiest of people.

You might have trouble sleeping, depression, loss of appetite or any of a number of other stress related symptoms. All of this because of some money troubles. While your finances are indeed important, so is your physical health.

Conclusion Having bad credit can hold you back in almost every aspect of your life. Buying a home, getting loans for college expenses; whatever it is -it may be a struggle to get financing. We all want to have something nice for ourselves, but having bad credit can keep you from being able to.

It also affects you physically and can cause health problems you wouldn’t even think of. High blood pressure and heart attacks can be a reality in some cases, so be careful with your credit, guard it closely and don’t abuse it.