You don’t really understand what all in your life is impacted by credit until you face problems in your credit report.
Whether you just made some poor decisions when you were younger or suffered from a bad situation like loss of employment, dealing with bad credit can have far-reaching consequences.
We explore the many different areas of your life that are impacted negatively by bad credit. They’re not limited to just your ability to get a loan, although that certainly is part of the fallout.
Of course, this doesn’t mean you’re helpless. By taking positive steps to rebuild your credit, you can get away from these negative consequences over time and be eligible for bad credit car loans in Barrie.
The Struggle Is Real
If you’re stressed about having bad credit, that’s actually not an unreasonable concern. Damage on your credit report can have far-reaching implications for your life. This is why it’s best to properly manage your finances and not get behind on debts.
Poor credit certainly affects your ability to get credit in the future, making something like a bad credit car loan in Barrie necessary. What most people don’t realize is it can complicate other areas of your life. If you’re in such a situation not all is lost, but you need to do everything in your power to turn things around.
Getting Turned Down on Loans
When your credit is poor, the fact is you have fewer opportunities at your disposal. This means you might apply for loans and get turned down over and over. It’s a frustrating thing to deal with, but that’s the reality of damaged credit.
This means those deals on car loans you see advertised aren’t an option since the fine print spells out they’re only for people with stellar credit files. You might find that as you go to a dealership to buy a car, the dealership can’t get you approved or will only sell a car that you don’t want. When you apply for credit cards, the reply is often a rejection with a list of reasons why, such as collections on your credit file, a bankruptcy, or other problems.
There are some options for getting approved on a loan. After all, things like a bad credit car loan in Barrie do exist. But you’ll need to put in the extra effort to find these types of options, which can be stressful and difficult.
High Interest Rates
You probably haven’t thought of an interest rate as a gauge about how comfortable a lender feels about extending credit to you, but that’s absolutely what it is. When you apply for any loan, such as a bad credit car loan in Barrie, the lender takes a close look at your credit report and score. Every negative item on the report is noted and a decision about what kind of interest rate you should be approved for is made.
If your credit is poor, expect a pretty high interest rate. If you’re buying something like a car, that means you can’t get as expensive of an option. The high interest rate diminishes your purchasing power, so you have to settle for something which isn’t what you really want.
A higher interest rate means you pay more over a certain period of time for the same loan amount as someone with better credit and a lower interest rate. Having better credit helps you get ahead financially in life, so it’s worth the effort to fix your credit and stay on track.
More Down on Loans
Not only does having bad credit mean you suffer by paying more in interest for the life of a loan, you also have to often pay more up front just to get the loan approved.
Say for example you get a bad credit car loan in Barrie where the lender wants you to pay an extra $4,000 up front as part of the terms of the loan. This is because you have poor credit. Someone with excellent credit might only have to put $500 down or maybe nothing at all.
The idea is if you’ve already invested a large quantity of money into something you’re getting a loan to purchase, such as a car or house, you’re less likely to walk away without paying off the loan first.
Credit Card Limit Decrease
Quite a few people are surprised to hear from their credit card company that the limit on their card has suddenly been decreased. It’s a sad consequence of bad credit.
Credit card issuers will periodically run your credit to see if anything has changed. This isn’t necessarily a bad thing since an improved credit score could mean a larger limit on your card. If your score has gone down because of negative items on your credit file, the result might be a fraction of the credit limit you enjoyed before.
The surprise of a lower limit on your credit card can be shocking. It can also mean plans you had for the future need to be rearranged, like a vacation. If there’s an emergency, you have less financial power to deal with unexpected expenses. Understandably, most people are upset about such an outcome. Maintaining a high credit score guards against this situation.
Utility Security Deposits
When you move and have to open new utility accounts, a credit check is often part of the process. This is true for electricity, natural gas, phone service, internet, or satellite/cable TV. If your credit is bad, the utility company can require a pretty hefty security deposit.
The unfortunate truth is many people who have financial problems switch utility services without paying off the amount they owe. This is especially true for television and internet services, since you often have multiple options in a given area.
This means having poor credit makes you more of a risk for any utility service. To manage that risk, the company will hold onto a sizable amount of money. That way if you stop the service and refuse to pay what you still owe, the company can just keep the deposit and hopefully recover all or at least a good portion of what you should have paid.
People with good credit might not have to pay a deposit at all, so they can use that money for other things.
Maybe you don’t know, but your insurance company does look at your credit. This is true if you’re insuring a car, motorcycle, house, or whatever else. That might not seem fair, since you might also be dealing with a bad credit car loan in Barrie as well, but insurance companies have done research and claim people with lower scores tend to file more insurance claims.
There’s considerable debate about why people who don’t have great credit use insurance more often. It could be a lack of personal responsibility, general carelessness, or the tendency to try to get more than your “fair” share. Even though not everyone with a bad credit car loan in Barrie is committing insurance fraud, you’ll get lumped in the same group as people who might. The result is higher insurance premiums and that adds up over time.
Trouble Finding Housing
As if the problems above aren’t enough, you can also have trouble finding an apartment or other housing if your credit is bad. Obviously, buying a house when you have credit problems usually doesn’t work out well. But you can still have a tough time when you’re renting.
Most landlords these days pull your credit report as part of the application process to rent an apartment or home. This is especially true of big corporate management companies, but even private landlords follow this practice.
Just like with insurance, the argument is that your credit is a reflection on how you manage money. Many landlords claim that people with serious credit problems or a low score are more likely to not pay their rent on time, try to move without paying all rents owed, and damage the property while living there. All of these actions cost landlords money, so they take steps to protect themselves against such tenants.
This could mean you don’t get approved to rent some nicer places to live. If you are approved, you might have to put down a sizable security deposit, just in case you damage the property or try to skip a payment.
There are few things more stressful in life than struggling to find a good place to live. Being forced to live somewhere that isn’t very nice, is located far away from where you work or like to spend your time, etc. can but a real damper on your life. This is why fixing your credit should be a top priority.
Difficulty With Phone Contracts
You might not think of it as credit, but a cell phone company is actually extending just that to you each month if you’re on a contract. That’s why you can spend beyond the set monthly payment, almost like a type of credit card. If you’re financing a smartphone through the service, it’s even more like a loan.
This is why when you get a cell phone contract, the service provider runs your credit. The cell service needs to protect itself against people who run up a large bill and never pay it off.
If your credit is bad, you might have to pay a large deposit up front on the service. Even worse, you might not qualify for regular cell phone service, making a prepaid plan or month-to-month service necessary. This might mean paying more each month to finance a phone, or having to pay the cost of a phone upfront, which can be quite expensive. Some people can’t handle the expense and so don’t have a cell phone, which obviously comes with difficulties in this modern age.
Trouble With Employment
While you need money to right the wrongs of your past, poor credit can have a serious impact on your employment prospects. It’s just another reason why getting behind on debts is never a good thing.
Not every job will pull your credit or care about it at all. However, some positions might only be open to those with solid financial situations. This is true if you work in the finance industry or other positions where you’re handling others’ money on a consistent basis. The temptation to commit fraud to pay back delinquent loans is too strong in such a situation.
Often, upper management in organizations must submit to regular credit checks. As you likely know, these are the kinds of positions which come with a healthy pay. Again, since you’re in a position where the ability to commit fraud is very real, having compromised finances is seen as a bad combination.
Employers don’t care about your credit score. What they check is the report for items like bankruptcy, collections, missed payments, or just a high amount of debt. Of course, these also negatively impact your credit score, so it’s just best to do what’s necessary to maintain a higher score.
One of the most stressful parts of having bad credit is dealing with the relentless collection actions by old and current creditors.
This can include regular phone calls and voicemails urging you to contact a collector and pay off your debt. Collectors might garnish your wages or even file court actions against you.
If you have a secured loan, such as bad credit car loan in Barrie, the creditor can send someone to repossess the collateral. That’s not a fun situation to deal with, especially if you need that item to get around or do other necessary things.
Dealing with collectors is stressful and frustrating. They can be rude and uncaring about why you’re in a bad situation. This is yet another effect of bad credit.
Trouble Starting Your Own Business
If you have a hot idea for a new business, poor credit can make doing anything with that pretty difficult. You likely have a damaged credit history because of money problems, whether you haven’t been making enough or aren’t good at managing what you have. That means you likely don’t have a large savings sitting ready to spend on getting a business off the ground.
New businesses require a considerable amount of capital to reach the point of profitability. There are some rare exceptions, but they’re just that: exceptions. Usually, people take out a business loan from a bank to get the money. Just like with other loans, the bank will look at your credit before making an approval decision. Poor credit can kill your chances of getting a loan, or it might mean the amount you’re allowed to borrow is far less. Banks reason that if you can’t manage the finances in your own life, it’s likely you’ll mismanage the finances for your business.