3 Services Tips from Someone With Experience

The Effects of Bad Credit

In financing, the numerical representation of an individual’s credit value based on a degree of analysis of the individual’s credit profile is referred to as a credit score. A credit score is basically a yardstick measure for borrowers to get a loan, such that financing companies produce a credit score, ranging from 300 to 850 with 850 as the highest score, for a borrower with a Social Security number using data from the person’s previous credit history and lenders use a credit score to evaluate the probability that a person repays his debts. The borrower’s personal finances and his capacity to borrow are affected by credit scores and if you’re not performing well with your credit score, which means you’ve got bad credit, the following effects are bound to impact you.

Hard to borrow money

When your credit score is low, the less likely will you find a willing lender or it will directly affect your likelihood of securing approval for a new loan or a credit application. If your score is 698 and the qualified score is 700, it just shows that even if your score is almost close to the cut off score level, you will have difficulty borrowing for a new loan, because many lenders don’t make loans where the credit score falls below the accepted level.

Higher rates when you borrow

Lower credit scores translate to higher interest rates when your loan is approved and additional restrictive terms are included in the loan agreement, which proves to show that money lenders and financing companies are relying a lot on a borrower’s credit scores. The interest rate difference can mean an additional of tens of thousands of dollars to the total cost of a mortgage, depending on how the loan is structured, but the same principle applies to auto loans, home improvement loans, personal loans, and credit cards.

Trouble renting an apartment

If you’re applying for an apartment lease and your credit score is low, the landlord will likely demand for a pre-lease credit check, but this depends on the kind of apartment you intend to rent, because well-kept, modern apartments in a desirable neighborhood will require a higher credit standards compare to substandard dwelling units in undesirable areas, where landlords may be lenient to the credit score.

Trouble getting a job

If you’re looking for a job, there’s a high probability that your credit status will be checked by the company you are applying to, most especially if the position you are applying requires a security clearance. Ideally, an employee can work efficiently if there are no distressing factors, which he/she is carrying, one of which is a bad credit, and that is why employers check on the credit condition of an applicant before hiring, in which this practice is actually banned or restricted in a handful of states in the US.

Tension on personal relationships

Your credit score together with your overall credit profile can break or not your family life, as well as your personal relationship, since both you and your spouse’s credit profiles can affect your ability to qualify for an auto or home loan that you’re applying together, as lenders look at both profiles and assess your household’s overall credit risk. If one of you falls lower in the credit qualification, most likely a higher interest rate or a larger down payment will be required and, if you fall behind payments, you not only suffer the consequences of a low credit card score, but a strain in your family relationship is also gradually developing as an outcome of stress from being confronted with these financial issues.