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What Bad Credit Can Do to Your Life

A credit score is a numerical representation on the credit-worthiness of an individual, which is based on a level analysis of a person’s credit files. Financing companies produce a credit score, ranging from 300 to 850 with 850 as the highest score, for a borrower with a Social Security number using data from the person’s previous credit history and lenders use a credit score to evaluate the probability that a person repays his debts. For the borrower, your credit score don’t just affect your personal finances, but it can cost your capacity to borrow, such that if you’re not performing well with your credit score, which means you’ve got bad credit, the following effects are bound to impact you.

Hard to borrow money

Getting a low credit score will directly affect your likelihood of securing approval for a new loan or a credit application or less likely find a willing lender. Many lenders don’t make loans where the credit score falls below the accepted level, for example, your score is 698 and the qualified score is 700, it just shows that even if your score is almost close to the cut off score level, you will have difficulty borrowing for a new loan.

Higher rates when you borrow

When a borrower’s credit score is a few points way below the qualified score, his chances of borrowing may be slim but if he gets his loan approved, he will be confronted with a higher rate and with additional restrictive terms from the lenders or financing institutions, which shows that credit scores are highly valued. The interest rate difference can mean an additional of tens of thousands of dollars to the total cost of a mortgage, depending on how the loan is structured, but the same principle applies to auto loans, home improvement loans, personal loans, and credit cards.

The impact on your housing condition

If you’re applying for an apartment lease and your credit score is low, the landlord will likely demand for a pre-lease credit check, but this depends on the kind of apartment you intend to rent, because well-kept, modern apartments in a desirable neighborhood will require a higher credit standards compare to substandard dwelling units in undesirable areas, where landlords may be lenient to the credit score.

Difficulty to find jobs

Your credit status can be a part requirement in job applications by some companies, most especially on positions that require a security clearance. In a handful of states in the US, the practice of a credit status check on an applicant is banned or restricted, but this doesn’t stop employers from doing the checking rounds because ideally an employee can work efficiently if there are no distressing factors, which he/she is carrying, one of which is a bad credit.

Stress on personal relationships

The status of your credit score and your credit overall profile can also affect your personal relationship and family life in a manner when you and your spouse will apply for either a home loan or auto loan, since lenders look at both you and your spouse’s credit profiles and assess your household’s overall credit risk. The strain from high interest rate, large down payment which are results of low credit qualification is also affecting your family relationships, since financial issues are stressful to the well-being of a person.

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