Having Bad Credit Can Cause A Lot Of Trouble For You
Good credit means a lot of different things to different people. The advantage of having good credit are many and are fairly self-evident. You need to make payments and manage your money well to get good credit, but it is better than the alternative; bad credit. So what is bad credit and just what does having bad credit mean to a consumer? This is a complex question with a complex answer.
Lenders and credit card companies use what is called a FICO score to decide if you are eligible for any kind of financing. A score which is 720 or above is considered to be excellent and will enable you to qualify for nearly any kind of loan you request. A score of 650 or lower is when you may begin to face difficulty.
Who decides your FICO score? This is done by the “big three” credit reporting bureaus, Transunion, Equifax 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 biggest problem with having a bad credit history is having to pay higher interest rates.
The FICO score is also used to determine the interest rate you will be eligible for. A good score can get you in the door at a relatively low rate like 7% or 9%. You may be able to get financing but will pay a much higher interest rate as a result.
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.
The results of this can be loss of sleep, loss of appetite, depression, headaches, stomach trouble and a host of other stress related maladies. All related to your money problems. Yes, your financial situation is important, but so is your physical well-being.
Conclusion Having bad credit can hold you back in almost every aspect of your life. Buying a home, getting loans for college expenses; whatever it is -it may be a struggle to get financing. We all want to have something nice for ourselves, but having bad credit can keep you from being able to.
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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