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Navigating the world of personal credit is harder for some people than others. Even when people are in a position to improve their credit scores, there is often a learning curve they have to climb to understand the strategies to recover. There are things that hurt you, and knowing the difference can protect your financial health or keep you on the verge of a downward spiral. How Poor Credit Affects Your Financial Life Once you know, you can do your best to take the necessary steps to build and maintain good financial standing with credit bureaus.
1. Few career opportunities
If you’ve ever wondered, “Can I get a low credit business loan?”, you’re not alone. If you are interested in starting a business and trying to get business credit, you will need to use your own credit first. Poor credit makes this very difficult and forces you to look for more cumbersome ways to fund your business. Entrepreneurs aren’t the only ones affected. Many states allow companies to review a potential employee’s credit report. This means employers can see outstanding balances, student loans, foreclosures, late or unpaid payments, and more.
2. Spend more
If someone with a bad FICO score takes out a loan, the interest rate will be significantly higher than someone with a good credit score. That means the cost of the loan will be higher. This applies to car loans, personal loans, or mortgages. Also, most American insurers can take your financial habits into account in your risk assessment, which can result in higher car and home insurance premiums. Also, when it comes to utility companies, you may find yourself having to pay higher deposits when securing connectivity.
3. Delay retirement
Most people look forward to the day they can retire. But people with low credit are more likely to retire later than those with high credit. It is difficult to build wealth and credit at the same time. To pay less interest, you may want to consider a balance transfer credit card. With less debt at retirement age, retirement becomes a viable option and does not need to be postponed.
4. Rental
Many property management companies check potential tenants’ credit scores. Generally they want a score of 620 or higher. The last thing they want to do is rent to someone who can’t consistently pay their rent on time. Low credit owners need a co-guarantor for their leases. Otherwise, you will have to pay a higher security deposit.
5. Few Lender Choices
Mainstream lenders such as Visa and Discover are less likely to enter into financial relationships with individuals with poor creditworthiness. So if you’re in a pinch and need an upfront payment, you can only access predatory lenders such as pawn shops and his 400%+ interest rate payday loans.
Sure, life is a little easier for people with better credit, but if poor credit is a problem for you or someone you know, there are ways to ease the strain on your financial life. Knowing the outcome is both an incentive and a deterrent. Be as financially responsible as possible. And don’t be afraid to ask for help learning healthy and responsible financial habits.
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