If you have a bad credit score, you probably realize that you will pay more in interest if you borrow money. However, higher interest rates are only one of the risks for people in New York with bad credit. A bad credit score impacts many other things, some that seem obvious and others that are not-so-obvious. Here are some of the potential disadvantages of having a bad credit score.
- Higher interest rates
- Inability to get credit
- Disqualified from some jobs
- Higher insurance premiums
- Problems getting utilities
- Greater debt/ fewer savings
While you may realize that a poor credit score means you pay higher interest when you borrow money, do you know what that means for you? For large loans, such as car loans, a higher interest rate can mean that you spend thousands of dollars more over the life of the loan. For mortgages, the difference can be tens of thousands of dollars. Even for credit cards, higher interest rates can make it difficult to ever pay the balance.
Of course, with bad credit you may also be unable to get credit. Certain lenders do not lend to high-risk applicants, which may keep you from getting the credit you need. This can limit your choices, especially for big purchases like homes or automobiles.
Many employers use credit checks as part of their employment screening process. Bad credit can keep you from getting many jobs. These jobs are not just high-status jobs or jobs that require security clearance, but everyday jobs that should have nothing to do with your credit score.
Speaking of things that have nothing to do with your credit score, did you realize that a bad credit score means you will pay higher insurance premiums in most areas? While bad credit does not cause bad driving, it is apparently related to a higher risk of auto accidents. Insurance companies use this to justify charging customers with bad credit higher auto insurance premiums.
You know that potential landlords will check your credit. In normal times, that can make it harder to find an apartment. When rental properties are scarce, it can make it impossible to rent an apartment on your own. Even if you can find a place to live, if you have bad credit the utility companies may require a substantial cash deposit before providing service.
Finally, bad credit can have a long-term impact on your financial health. When you pay higher interest rates, you lose money that you could have been using to build wealth. You not only lose the money you are paying on higher interest, but also the opportunity costs associated with that money. In other words, you could have been using it to make money. This can delay retirement and other long-term financial plans.