Bad credit can cause a whole lot more damage than you can actually imagine. If you have cultivated a habit of paying your bills after it is due, the extra late fees are most likely not going to be the only problem that you would face.
You may experience challenges ranging from getting a job to securing an accommodation. Here are some of the most commonly experienced problems that stem from having a bad credit score:
1. Employment Problems
When applying for certain positions, especially in the finance industry or upper management, you would typically need to have an impressive credit history.
In recent times, apart from requesting for a list of references, employers may also request permission to run a credit check. This is because the company would like to be certain that the potential employee is someone who can be trusted to make the right financial decisions on behalf of the company.
In fact, a survey carried out by CareerBuilder showed that 72% of employers admitted to running background checks on new hires and of those, 29% admitted to including a check on potential employees’ credit as well.
Therefore, leaving your credit score to plummet may even cost you a means of paying back your debt.
2. Higher Insurance Costs
Unknown to a lot of consumers, racking up a high credit card bill or defaulting on mortgage payments would result in paying higher premiums for auto insurance.
The reason is not far fetched. Research has shown that there is a link between poor credit and a high probability of drivers filing a claim through their auto insurance carrier. In a 2019 report that was released by insurance comparison site Zebra, they found that drivers with poor credit scores paid more than twice as much as customers who had impressive credit scores.
Other insurers may also take credit reports into consideration. For instance, when some homeowner’s and renter’s policies want to determine rates, they make use of a proprietary credit-scoring system.
3. Trouble With Securing Loans
Before banks issue loans, they would typically need a guarantee that you can pay back; that you’re creditworthy. And what better way to determine the test of your credit than to order your credit score through providers like VantageScore and FICO.
In order to access your creditworthiness, these credit-scoring models make use of the information that they get from your credit reports such as payments histories and loan balances.
4. Difficulty Securing Accommodation
In terms of securing a place to stay, it isn’t only home buyers that have to bother about not-so-great credit history. When you’re trying to rent, your credit history may haunt you as well.
Just like banks, landlords also like to determine whether you have the ability to indeed pay up on time before giving you the keys. So, for part of your application process, they would most likely request for your credit report.
Therefore, if you have a spotty history, dotted with a couple of past financial blunders, getting a new place might be pretty difficult. Although there are ways of getting past your bad credit score, in this case, it is just a lot less stressful to maintain an impressive score that anybody can work with.
Essentially, good credit history is as important for older adults as it is for the younger ones. For long stays at assisted living centers or nursing homes, Medicare doesn’t cover all of it. Such establishments usually require private payments and would typically run a credit check to ensure that the applicant can foot the bill.
Having a bad credit score can very much be avoided. However, if you’re already in a fix like that, there are some highly effective ways to repair your credit. Once you know what to do, you can relax with an assurance that you would be debt-free in no time.