Having Bad Credit Can Cause A Lot Of Trouble For You
Having good credit means a lot of things to a lot of people. The positives are numerous and self explanatory. Granted, they bring with them payments, interest rates and a need for effective management. The question arises as to what having bad credit means to the consumer and this is a many faceted situation.
Credit card companies and other lenders assess your credit using what is known as a FICO score to decide if you are a good risk for financing. A score of 720 or higher is an excellent one; you will be able to obtain just about any kind of financing you ask for. However, a score of 650 or lower is somewhat problematic.
These scores are calculated and reported by the “Big Three” credit reporting agencies, which are Transunion, Experian and Equifax.
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 real problem with a bad credit history is higher interest rates.
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 once faced a situation where I was trying to get a consolidation loan. My credit score was not as good as it should have been and as a result, I would have been paying an interest rate of 24.99%! This is a very high interest rate, $25 for every $100 of outstanding balance each year, or $250 on my balance of $1,000!
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 In conclusion, having bad credit affects your financial opportunities in every area. From buying a home to borrowing for junior’s college expenses, you may have a lot of trouble with the money. Everybody wants to have nice things and bad credit will keep those things from coming your way.
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.
About the Author:
Steven J. Talrechi has been writing about credit reporting and credit reporting practices for over a decade. He specializes in helping others with second chance banking and obtaining a checking account when they have been turned down by banks.
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