Consequences of bad credit



We all know that your credit score is used to determine if you are accepted for a credit card. Did you know that it has ramifications far beyond simple credit cards?

Credit scores and loans

With credit cards, your credit score will largely determine whether you are accepted or not. To a lesser extent, this can determine your credit limit, but for the most part you either get the card or you don’t.

Those with excellent credit have the best choice of credit cards available in the market. They get lower rates, better benefits like introductory APRs etc. However, those with bad credit are faced with a completely different proposition. Bad Credit Credit Cards come with a lot of fees that you don’t see with regular credit cards, like application and processing fees.

Basically, it’s just a fee to get money from you (but also to protect the issuer who takes the risk of issuing to those with bad credit). You may need to resort to secured credit cards if your credit is really bad.

When it comes to getting a mortgage, it’s not that simple. With a high credit score, you will be eligible for the loan at the lowest rate. The lower your score, the higher your rate, so every little bit counts. The same is true for auto loans.

Your credit and your job

It is increasingly common for employers to conduct a credit check on their employees as a condition of employment. While this practice may be justifiable for positions related to money or security, I find it to be gross abuse of credit scores. Your credit information has been compiled to help a potential lender determine the likelihood of you paying the money back. It was never intended to be an indicator of job performance.

Nevertheless, it is a reality that this practice remains legal and is growing. When you consider that job loss itself is a major cause of bad credit, this practice creates a terrible catch-22 for the unemployed.

Insurers are taking the bandwagon

As long as employers abuse credit information, why not allow insurance companies to do the same? Somehow, they’ve decided that your credit information correlates with the likelihood of you submitting a claim. Whether it’s correct or fair, they do it anyway. If you have poor credit, you may have to pay higher rates for the house and car insurance without even knowing it.

Law enforcement?

I have seen many police dramas where the first thing detectives do is check the suspect’s credit report. The idea is that if the crime is robbery, or if money is the motive for murder, the person who owes a lot of money is considered to have a motive.

I don’t really have any law enforcement experience so I don’t know if this actually happens in real life. Even on TV it’s just used to find potential suspects, not to convict anyone of anything. That said, it is interesting to wonder whether people with bad credit are more likely to be questioned by the police for crimes to which they were only loosely related.

Cell phones and utilities

People with bad credit or low credit scores find it increasingly difficult to open accounts with utility companies, and let’s face it, almost everyone has a cell phone these days.

It’s not that utilities and cell phone providers will deny you outright because of bad credit. After all, everyone needs the electric company, but if you have credit problems or a bad credit history, be prepared to pay a large deposit to turn on your electricity.

Although consumers who need cell phones have other options such as pay phones to temporarily avoid the large deposits required, unless you have a spouse or can put utility bills on behalf of someone else, you are pretty much required to make a deposit. costs.

Bad credit and bank accounts

A bad credit rating can also determine whether a bank or financial institution will even allow you to open a bank account. Debit cards, checking accounts and savings accounts are as essential to life as utilities, and if your credit is too far down the dumps, you may find yourself looking for ways other than your credit union to neighborhood to keep your paychecks. There are specific online banks for those with bad credit who may have difficulty opening an account elsewhere.

Many consumers with bad credit can live without credit cards and may even survive with alternatives such as secure and paid cards. Unfortunately, there are areas that include lifesaving products and services that are also affected by credit where bad credit can make things much more difficult.

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