Six Ways Bad Credit Can Ruin Your Life by Patrick Stoy

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Okay, using the word “ruin” in terms of what a bad credit score can do to your life might be a bit of a stretch.

It’s probably more accurate to say that bad credit can produce a nasty hiccup, require a detour, or create a pothole in the road of life.

The topic came up recently when I was chatting with an older friend of mine, an owner of several investment properties, a vacation home and a number of classic cars which were all bought for cash. She had a simple question – Why should I care about having good credit? I’m definitely not trying to buy more property.

Most people understand that a good credit rating is necessary if they are looking to obtain financing for a home. This is a situation where bad credit could cost you thousands or even tens of thousands of dollars. Rest assured that lenders will thoroughly examine your credit rating and credit history during the mortgage application process. In the worst case, your loan application could be refused if your credit is poor.

The other ways that bad credit can seriously affect your quality of life and significantly reduce your ability to be creditworthy are not so obvious.

The list below contains a number of items that can become expensive or inaccessible if your credit is less than positive:

  • Credit card – Interest rates on credit cards can vary between 7% and 36%. A good credit score can earn you 10 to 19 percent. With a bad credit score, the base interest rate can start at 22% and increase from there. This can have a huge impact, especially if you are wearing a scale.
  • Car insurance – It comes as a surprise to many people to learn that insurance companies in 47 states review an applicant’s credit rating before deciding on a rate. The result is that you could have higher than average rates for years to come. Some carriers may not even approve you for insurance coverage at all if your credit score is extremely low.
  • Job search – Believe it or not, it’s legal for a potential boss to analyze your credit report, as long as you approve it in writing. This type of information can be used to make decisions about hiring, and it is permitted under the Fair Credit Reporting Act. After all, many types of employers – such as banks, jewelry stores, credit card companies, etc. report. However, some states have laws that restrict the use of credit information in the hiring process.
  • Mobile phone plans – Like car insurance providers, mobile phone companies will check your credit before activating their service. If you have low credit, you may be paying more each month for a phone or plan.
  • Auto loans – Without a good credit rating, it can be difficult to obtain financing for a car. Those who are able to get a loan with bad credit could end up paying up to two percentage points more than someone with stellar credit.

It’s worth pointing out that while your credit is far from perfect, it may be possible to get financing for a home. Plus, sometimes there are small issues or discrepancies on a credit report that can be resolved with something as trivial as a phone call. Taking care of these can immediately blow up an individual’s credit score. For a consultation on your ability to secure funding or to obtain a prequalification letter, call me at the number below.

Patrick Stoy (NMLS numbers 39527 and 39166) has 18 years of experience in mortgage lending. Patrick is the CEO of Wilmington-based Market Consulting Mortgage, which he launched in 2005 with a mission to build lasting relationships with clients by delivering real value. To learn more about mortgage marketing advice, visit www.macmtg.com. Patrick can be reached at [email protected] or 910-509-7105.

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