Bad credit comes with some shame and feeling of being a poor financial manager, but it is not always because one intended to be irresponsible. Life could have happened, for example unexpected losses in business, high medical bills, or any other thing that could end up putting one in a financial quagmire. Bad credit could also be a result of miscalculations from your younger years like defaulting on a student loan or other loans.
So, what might be the things that may come as a result of a bad credit report? Would it affect your financial freedom, and how can you fix it?
Effects of a bad credit report
A bad credit report could have many negative consequences on your financial health and progress. Here are some of the things that may arise from a bad credit report:
Problems getting loans approved
Your credit score is a great determinant of whether your loan or credit application will be approved or not. Few lenders are willing to approve a credit application from a borrower with a low score. You will have a hard time getting a mortgage, auto loan, or a credit card. The lenders normally do not approve loans for borrowers who are below a given quality level, for example, for credit card approval you will need to have a FICO score of at least 670.
But does this mean that you are doomed if you have a bad credit report? Certainly not. You can work on improving it and increase your score. There are many approaches that you can employ including disputing errors in your report for correction, ensuring a low credit utilization ratio,and so on. You could also consider engaging credit repair experts to help you get tradelines to boost your score. You can check this reliable Source of trade lines to learn more about this credit boosting technique.
Higher interest rates and unfavourable credit terms
You may manage to get your credit application approved, even with a poor credit report, but the interest rates that you will pay for the product could be high. This will make the cost of finance too much. There could also be other unfriendly terms like being required to pay a higher down payment for an asset or a home or a shorter repayment period.
Higher insurance premiums
Auto and homeowner’s insurers sometimes consider the status of your credit in jurisdictions where this is not prohibited. They are interested in your timely repayment history and debt level. If you portray a poor performance in these two categories, you may end up paying higher premiums for the same policy than someone whose performance in the two aspects is more impressive.
Have to pay higher deposits for utilities
Utility providers review applicants’ credit before installation of various utilities such as water, electricity, telephone, and others. If you have bad credit, they will deem you as a risky customer and require you to pay higher deposits than a person with a good score.
As seen from the above,bad credit could affect you negatively in several ways. You will also have problem landing jobs since some financial institutions and governments consider one’s credit score when hiring. If your score is poor, you could miss out some good positions. It is therefore crucial to have a good credit report, or if it is bad, work on improving it by making payments in time, avoiding maxing your credit cards, and avoiding closing old credit accounts.