Your credit score is a three-digit number that is between 301 and 850. This number is important because it represents your credit history. Lenders use it to check on how trustworthy you are and know how you’ll handle their credit line on the basis of your financial history.
Your credit score greatly affects your financial and personal life. Here are 3 ways that bad credit can impact your life:
- You Attract High Rates And Huge Restrictions On Loans
With bad credit, getting a loan is a hustle all by itself and if you do get one, you are subjected to high-interest rates coupled with restrictive terms. Lenders are cautious when dealing with bad credit clients.
The effect of higher rates and huge restrictions can really hurt your bank account. Say for instance you approach a mortgage lender for a mortgage agreement. With a bad credit score, the lender will demand that you pay a hefty down payment of up to 20% of the home’s value before they process the mortgage for you. For someone with a good credit score in a similar scenario will pay a 5% down payment.
The interest rate difference between the bad credit score and the good credit score is quite high and this cuts across to other types of loans as well. It goes to show that a bad credit score will affect you negatively.
- Getting Approval On Loans Will Be Hard
A bad credit score will negatively affect the chances of you being approved to be given a loan or credit. The lower your credit score is, the less likely your chances are of finding a lender willing to offer you a loan.
Even if your credit score range is closer to the lender’s prime-subprime or the quality level cutoffs, you’ll realize that most lenders refrain themselves from offering loans to subprime borrowers and those whose credit score goes below their set quality level.
A credit score is termed to be excellent if it is rated at 700 to 850. A good credit score stands at 680 to 699. An average or okay credit score stands at 620 to 679 while a bad credit score is at 580 to 619. With a bad credit score, getting a loan will be a rough process.
- Personal Relationships Will Be Strained
Your credit score will have a direct impact on your relationships. After getting married to your spouse, his or her credit score can determine whether you will qualify to get, say, a home loan that you may be applying for together.
If you have an excellent credit score while your partner is not so good, upon making a mortgage application, the lender will look at both credit profiles and use that to assess the credit risk. The low credit score of your spouse will contribute greatly to the lender asking for huge down payments.
If your spouse isn’t qualified to get a new credit card, he or she can make a joint card application via your social security number. If he or she fails on making payments, your credit score will suffer. This will end up straining the relationship, resulting in disagreements and fights.
ConclusionA bad credit score will negatively affect your life and you need to avoid it as much as you possibly can. Do you have a bad credit score that you need help fixing? Check out https://www.crediful.com/bad-credit-score/ to find out how.