Nothing affects your financial life more than bad credit. Your credit score affects your income, interest rate and even relationships. If you, like so many others, are excessively using your credit card without considering the consequences consider the following.
What is bad credit?
Half of the problem is lack of knowledge. Many people don’t know their credit scores, what passes as good credit or even what sort of things affect their credit score rating.
Knowledge is power! If you haven’t already, visit a credit reporting bureau (online or off) today and learn the facts about your credit score. It’s important to check your credit reports at least a couple times a year and challenge any serious errors.
Depending on the credit reporting bureau, credit score rating can range anywhere from 300 to 850. Generally, 630 and above is considered a good credit score, while 620 and below is considered to be a bad credit card score. Note however, this does not mean that a person can not obtain credit. It does mean that the offer and terms will differ greatly from someone who does have a good credit score.
Your credit score is affected by numerous things. Though they vary in each country most of the factors are similar and include
- whether you pay your bills on time
- whether or not you borrow a lot of money from numerous accounts
- the amount of time you’ve been borrowing
- the types of credit you’re using (eg. auto loan, mortgage, credit cards, etc.)
The more negative marks you have on your credit report (such as late payments, bankruptcies, etc.), the lower your credit score.
Bad credit affects your job
Credit reports are used by many employers to decide who’s hired, fired and promoted. A bad credit score can cost you a promotion or even your job.
Employers have the legal right to use credit problems such as defaults or collection actions in their hiring decisions.
Credit checks are used typically to verify Social Security number and employment history and are done in situations where the person would have direct access to cash or when security clearances are involved.
However, you don’t have to be a bank teller or work in the private sector worker to be scrutinized. Anyone who has had trouble paying their bills can find themselves under the heat as more and more employers are using credit checks to determine who moves up the ladder and who’s asked to clear out.
Though you can not be fired for bankruptcy, late payments, borrowing numerous amounts several times, and collection action can affect your job. In most cases, you will not be considered for promotion and in some instances you can be fired.
This is why it’s important to know what is on your credit report, and to check it regularly.
Bad credit affects your credit card
While having bad or a low credit rating does not mean that you can not receive credit, most prime credit cards are out of reach to consumers with bad credit. The few credit cards that are available usually call for exorbitant setup fees or recurring monthly fees, “offer very low credit lines, often require cash deposits, and in most cases do not even report your positive credit activity to the credit bureaus.”
Bad credit affects automobile financing and home mortgage
Someone with bad credit is paying $5000-$9000 more on their car payments.
If you are buying a home with bad credit it can cost $50,000 to $130,000 in interest.
Bad credit affects your marriage
Soon to be married couples worry that their credit will be affected by their partners. Good news, only if you keep a joint account. Most financial advisors suggest keeping separate checking and credit card accounts. However, since a number of marriages end due to financial reasons it’s important that couples discuss their financial situations before getting married.
Having bad credit can greatly affect your overall lifestyle. Try to minimize the amount you use your credit card, pay your bills on time and check your credit score at least twice a year. This will help to ensure that you keep a good credit rating and remove any negative affects having a bad credit score can have in your life.