Having Bad Credit Can Cause A Lot Of Trouble For You
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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.
Credit card companies and other lenders assess your credit using what is known as a FICO score to decide if you are a good risk for financing. A score of 720 or higher is an excellent one; you will be able to obtain just about any kind of financing you ask for. However, a score of 650 or lower is somewhat problematic.
It is the “big three” credit reporting agencies who calculate your credit score. These companies are Equifax, TransUnion and Experian.
Financing opportunities A less than satisfactory FICO score will make it tough for you to get financing. You may have a very hard time getting a mortgage, car loan or personal loan. Having a bad credit history tells prospective lenders that you are a high risk for a loan or that you might not be able to repay a loan in a timely manner.
Interest rates The biggest problem with having a bad credit history is having to pay 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 had one experience where I was trying to consolidate a few bills into one payment. My credit score wasn’t what it should have been and my interest would have moved from 11% toget ready for this24.99% per annum. That is an astronomical rate of interest and you will end up paying $25 per $100 of your annual ending balance. On a balance of $1000, that adds up to $250 a year!
Personal health and well being While the financial burdens placed on your by virtue of having bad credit are arduous enough, there is also the mental strain to be considered. If you have bad credit, the odds are that you are in debt. The stress of this can really take its toll, even on the hardiest among us.
Stress can cause depression, lack of appetite and trouble sleeping among other stress related difficulties. While it is important to look after your finances, your health is even more important.
Conclusion Having bad credit can make many parts of your life a struggle. Buying a home, paying for college; all of it will be more difficult if you have a hard time obtaining financing. Everybody wants to have a nice life for themselves, but bad credit can prevent us from having what we want.
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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