How Does Having Bad Credit Affect Me?

by Steven J. Talrechi

Having good credit means a lot of things to a lot of people. The positives are numerous and self explanatory. Granted, they bring with them payments, interest rates and a need for effective management. The question arises as to what having bad credit means to the consumer and this is a many faceted situation.

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.

These scores are calculated and reported by the “Big Three” credit reporting agencies, which are Transunion, Experian and Equifax.

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.

Your FICO score will determine the interest rate you’ll be able to get. While a good score can get you rates between 7% and 9%, if you have a bad credit history you can still get financing in many cases – but at a much higher interest rate.

I had one experience where I was trying to consolidate a few bills into one payment. My credit score wasn’t what it should have been and my interest would have moved from 11% toget ready for this24.99% per annum. That is an astronomical rate of interest and you will end up paying $25 per $100 of your annual ending balance. On a balance of $1000, that adds up to $250 a year!

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.

The results of this can be loss of sleep, loss of appetite, depression, headaches, stomach trouble and a host of other stress related maladies. All related to your money problems. Yes, your financial situation is important, but so is your physical well-being.

Conclusion Having bad credit can hold you back in almost every aspect of your life. Buying a home, getting loans for college expenses; whatever it is -it may be a struggle to get financing. We all want to have something nice for ourselves, but having bad credit can keep you from being able to.

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.

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