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.
Credit and lending institutions use something called a FICO score to determine your eligibility for ANY financial request. Typically a score of above 720 is considered excellent and will qualify you for just about anything you ask for. When you go under about 650, it gets patchy for most consumers.
It is the “big three” credit reporting agencies who calculate your credit score. These companies are Equifax, TransUnion and Experian.
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 real problem with a bad credit history is higher interest rates.
Your interest rate will largely be determined by your FICO score. A good score will secure you low interest rates; 7% to 9%. However, having a bad credit history means that while you may still be able to get financing, you will be paying a much higher interest rate.
I personally had a situation some years back where I was applying for a debt consolidation loan. I had a credit score which was not what it should have been and as a result, I was offered a loan with a 24.99 interest rate! This is $25 per $100 dollars of outstanding balance or a whopping $250 on my $1,000 balance!
Personal health and well being The financial ramifications of having bad credit are bad enough, but there are other things to consider. If you have bead credit, you are probably already in debt. You may be getting mail from creditors or even harassing phone calls from collectors. This creates stress and strain on even the hardiest of people.
You might have trouble sleeping, depression, loss of appetite or any of a number of other stress related symptoms. All of this because of some money troubles. While your finances are indeed important, so is your physical health.
Conclusion In conclusion, having bad credit affects your financial opportunities in every area. From buying a home to borrowing for junior’s college expenses, you may have a lot of trouble with the money. Everybody wants to have nice things and bad credit will keep those things from coming your way.
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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