Like it or not, your credit score will follow you for life. A credit score represents your creditworthiness. It’s a numerical judgment based on an analysis of your credit files, and it’s used by lenders and other organizations (insurance companies, landlords, government departments, and more) to evaluate how risky it would be to loan you money. Whether you have excellent credit, poor credit, or no credit history whatsoever, it’s important to know how bad credit can affect you. Today, we’re discussing the repercussions of a low credit score, along with tips for coping with a substandard number.
How Bad Credit Can Affect You
You may not be approved for a home loan.
If your credit score is low, you’re perceived as a risk. It will be difficult to convince a mortgage lender that you are trustworthy and reliable, so you will likely struggle to obtain the loan needed to buy a house. Even if you are approved, a low score usually means a higher interest rate, which can add thousands of dollars to the cost of your home over the life of the loan. Unfortunately, renting may not be a walk in the park either . . .
You may find it difficult to rent an apartment.
Did you know that landlords often check credit scores before approving an apartment application? A low score may lead them to worry that rent won’t be paid on time. This doesn’t mean you’re out of options. You might look for a landlord who doesn’t require a credit check, offer a larger security deposit, or ask someone to co-sign the lease.
You might struggle to get a good cell phone contract.
Believe it or not, many cell phone companies check your credit score as well. Because they’re offering an ongoing service, they need to feel confident that you’ll pay your bills. If you’re struggling to get approved, you could try a prepaid phone or a month-to-month plan. These options often require you to pay for the phone upfront rather than spreading the cost over a contract, but they’ll still get you the phone you need.
Starting your own business will be very tricky.
Unless you have the funds ready in your back pocket, starting a new business can be a real challenge. Many new businesses rely on a loan from a bank, and a poor credit score makes it harder to convince a lender that you’re responsible with money. Even with a spectacular idea and data to back it up, you may find lenders hesitant to work with you. You might need to explore other routes, such as bringing on a partner or investor, starting smaller to limit upfront costs, or looking into lenders who weigh more than just your credit score.
It may prevent you from obtaining a car loan.
Few lenders are willing to give a car loan to someone with bad credit. It’s not impossible, but it will likely be challenging, and it often comes with a high interest rate and a large down payment. That combination can make a traditional car loan expensive and hard to qualify for.
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Luckily, there is an alternative. Instead of purchasing a new car with a loan, try leasing a high-quality car at a dealership that doesn’t take credit into consideration. For example, you might want to check out Auto By Rent, a trusted lease-to-own auto dealer in Springfield, MO. We can help you secure a quality vehicle regardless of your credit history. To learn more, request a free quote or contact us today.
We look forward to hearing from you!