Many people will tell you throughout your life that you need to have a good credit score, and they are right. Bad credit can cause all sorts of hardships and limit future options. While you can turn it around and improve your credit, there are many ways that bad credit can affect your financial life.
Worse Loan Options
One of the worst financial strains of bad credit is loan options. Banks and loaners look at your credit score to determine if they can lend you money and how much interest to charge. A bad credit score will result in higher interest rates and more rejections, making it harder to borrow money.
Big Purchases Are Harder To Make
Financing options for large purchases rely on your credit score. If your score is low, you’ll have fewer options. Additionally, some places may refuse to sell something to you if they believe you can’t pay it back because of your credit score. Things like new cars or phones are much harder to get with bad credit.
Increasing Insurance Costs
Insurance companies base your rate on risk, which increases if they think you can’t afford to pay them. That’s why they frequently increase the monthly principal if you have a bad credit score. This is a big concern for people who need SR-22 insurance. But while a low credit score can complicate things, you can still get SR-22 insurance with a bad credit score.
Most landlords run background checks on potential tenants and check their credit scores. They may reject a tenant with bad credit out of fear of them missing payments. This can significantly limit housing options for people with low credit scores.
Bad credit can negatively affect your financial life by making it harder to get loans, big-ticket items, and housing. However, you can slowly improve your credit score over time by making smart budget decisions so you can get the things you need.