Good credit - it means many different things. There are a number of advantages to having good credit; these are pretty obvious. While getting and maintaining good credit involves a high degree of fiscal discipline and making payments, it is well worth the effort. So how does bad credit affect you? What are the disadvantages of having bad credit? This is a question which it takes more than a few words to answer.
Lenders and credit card companies use what is called a FICO score to decide if you are eligible for any kind of financing. A score which is 720 or above is considered to be excellent and will enable you to qualify for nearly any kind of loan you request. A score of 650 or lower is when you may begin to face difficulty.
It is the "big three" credit reporting agencies who calculate your credit score. These companies are Equifax, TransUnion and Experian.
Financing opportunities A poor FICO score will make it difficult, if not impossible to get any kind of financing. You will have a very difficult time securing a mortgage, a personal loan or a car loan. Having a bad credit history says to lenders that you are an unwise risk and/or may be unable to pay back a loan on time.
Interest rates The biggest problem with having a bad credit history is having to pay higher interest rates.
The FICO score is also used to determine the interest rate you will be eligible for. A good score can get you in the door at a relatively low rate like 7% or 9%. You may be able to get financing but will pay a much higher interest rate as a result.
I personally had a situation some years back where I was applying for a debt consolidation loan. I had a credit score which was not what it should have been and as a result, I was offered a loan with a 24.99 interest rate! This is $25 per $100 dollars of outstanding balance or a whopping $250 on my $1,000 balance!
Personal health and well being While the financial burdens placed on your by virtue of having bad credit are arduous enough, there is also the mental strain to be considered. If you have bad credit, the odds are that you are in debt. The stress of this can really take its toll, even on the hardiest among us.
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.
Bad credit can even take a toll on your health and cause you many problems. High blood pressure and even heart attacks are not unheard of; so be careful with your credit and take care of it - you'll be glad you did.
About the Author:
Steven J. Talrechi has been writing about credit reporting and credit reporting practices for over 10 years. 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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