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What Bad Credit Can Do to Your Life

Usually, in the loaning system, lenders depend on credit scores, which is a numerical representation on the credit-worthiness of an individual, which is based on a level analysis of a person’s credit files. 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. For the borrower, your credit score don’t just affect your personal finances, but it can cost your capacity to borrow, such that 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

There will be a difficulty to borrow money or get approval for a new loan or a credit application if your credit score is low. Even if your score is almost close to the cut off score level, for example your score is 698 and the qualified score is 700, many lenders don’t make loans where the credit score falls below the accepted level.

Confronted with 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. Depending on how the loan is structured, but the higher rate difference can cost you tens of thousands of dollars to the total cost of a mortgage, and the same principle treatment is applied to auto loans, home improvement loans, personal loans, and credit cards.

Effects on your housing situation

When your credit score is low and you’re applying for an apartment lease, the landlord may be lenient to your credit score but he will likely require for a pre-lease credit check, as well as offering an apartment unit that is substandard and in an undesirable areas; however if your credit score is high, you’re likely to be offered with a well-kept, modern apartment in a desirable neighborhood.

Trouble getting a job

There is a high probability of employers to check on the credit status of prospective employees during the hiring process, which shows that the credit score level of an applicant can be a contributory factor to his future employment, most especially with positions that need a security clearance. In a handful of states in the US, the practice of a credit status check on an applicant is banned or restricted, but this doesn’t stop employers from doing the checking rounds because ideally an employee can work efficiently if there are no distressing factors, which he/she is carrying, one of which is a bad credit.

Tension on personal relationships

There is a strong impact on how your credit status can affect your family relationship, especially in situations when you’re applying for either a home loan or an auto loan, because lenders look at both you and your spouse’s credit profiles and assess your household’s overall credit risk. A higher interest rate or a larger down payment will be required, if one of you falls lower in the credit qualification, 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.