Karl Utermohlen

10 Ways Bad Credit Can Limit Your Opportunities in Life We’ve been living in a difficult economic climate for the better part of a decade now, marked by rising costs of living and inflation. Despite these circumstances, employers have failed to raise wages accordingly, leaving many workers in financial hardship over the years. These challenges have caused many to default on their loans and fail to pay their monthly credit card bills, slashing their credit score. The importance of having strong credit is larger now than it has ever been as failing to meet your fiscal responsibilities can greatly limit your future prospects in finding a home, buying a car or succeeding in your job hunt. After all, a NerdWallet study found that 43% of Millennials have a poor credit score, while this number is 33% for Generation X-ers and 20% for Baby Boomers. Here are some ways a bad credit can hurt you. Renting or leasing a home Finding a place to live is not as straightforward as you may thing as landlords often turn to credit checks to examine the reliability of their prospects. If they believe you are incapable of paying your rent every month, they might turn you down for someone else who is more creditworthy. A recent study from TransUnion discovered that 43% of landlords use credit screening during the leaning process, while 48% said a solid credit score is one of the three most important elements when accepting a lease application. Even if you are accepted as a tenant in an apartment, you may have to pay a higher amount upfront, including the security deposit, first and last months’ rent, and possibly one or two more months worth of rent on top of that. Utility companies Landlords and utility companies are two separate entities that you answer to when renting a home. While keeping up with your monthly payments is an integral part of the leasing process, paying your utilities every month demonstrates reliability and consistency. Companies that offer you electricity, water, cable and Internet also perform credit score checks on tenants. If you have a history of late or unpaid bills, utility providers may require you to pay a security deposit up front in order to service you. Paying this fee essential as your services will not be activated until you pay up. Getting a loan Obtaining a loan to secure temporary financial stability is sometimes necessary if you don’t have the cash to make the first down payment necessary for your home, car or for other relocation purposes. Regardless of whether you seek a loan from a bank or a private lender, chances are these institutions will look up your credit history to determine whether or not you will be accepted for a loan. Even if you are accepted, you will probably be responsible for paying a higher amount every month. Higher rates and more restrictions Once you do get that loan, a low credit may prompt the lender to offer you a high interest rate and more cagey restrictions on it. The first down payment on a loan may also be higher with a high credit score. The terms vary from lender to lender, but having an underwhelming score may cost you a down payment of 15% to 20%, amounting to $22,500 or $25,000 on a $150,000 home. Alternately, a strong credit score may only cost you 5% upfront, or $7,500. The difference on a low mortgage interest rate and a slightly higher one can be gargantuan as even one additional percentage point may set you back an additional $10,000 or more over the long term. The same principle applies for smaller loans and credit cards. Increased car insurance rates Anyone who owns a motor vehicle needs insurance to protect them from any fiscal liabilities caused by an accident or mechanical malfunction. Some car insurance providers consider those with bad credits to be more reckless driver, increasing their rates or denying them auto coverage. A study conducted by InsuranceQuotes discovered that those with a poor credit score pay double the premiums as someone with a solid credit score. The interest rates for monthly car payments may also be higher if your score is below 700, which is considered to be the threshold between a strong credit score and a weaker one. Job prospects You would think that a low credit score may not affect your job prospects as you need the money to improve your score, but in some cases, it does. Some employers look at credit scores to see how reliable their prospective workers are despite the questionable legality of this practice as a Psychologist-Manager Journal found there’s little correlation between a worker’s credit and their job performance. Some lawmakers are rallying to eliminate this practice as credit score discrimination prevents some workers from improving their financial standing. As thing stand, employers have to inform you if your credit is the reason you weren’t hired, but you’d be hard-pressed to find a legal infraction in this scenario. About 25% of Americans have had to go through a credit check for a job, while 10% have been denied an employment opportunity due to a low score. Security clearance and professional licensing Even if you do get the job, you may be denied a security clearance necessary to perform the work required of you with a bad credit. If you’re looking to work for the government, you might have to increase your credit in order to be considered a trustworthy and reliable employee. Getting a professional license can also be challenging without a solid credit score, including medical, construction and law licenses. The Fair Credit Reporting Act grants government agencies the power to regulate professions using credit reports. Small business owners If you’ve gotten out of the rat race altogether and started your own company, you may still struggle to achieve your full potential as a low credit could limit your ability to amass funding. Getting a solid line of credit for your start-up could be a challenge in this scenario. Franchisers and venture capital firms may be dismayed by the fact that their cash is going to someone who isn’t fiscally responsible. In these cases, they may cut funding or require you to put up more collateral on the loan, such as your home. Lack of emergency funds If your score is not optimal, chances are you don’t have much of an emergency fund. Maxing out a credit card and defaulting on loans could result in your primary credit line shutting down in a time of need. There have been numerous cases of natural disasters ravaging all across the U.S. in which residents found themselves stuck in the storm due to their inability to buy a bus ticket with a credit card in order to leave the location. Quality of life and health insurance prospects Professionals have examined the physiological effects of having a bad credit score, and they’re not good. Going through multiple loan application processes, getting denied, long periods of inactivity and limited financial range can all take a toll on your health. Bad credit can lead to anxiety, high blood pressure, stress and depression. Unfortunately, a lower credit can also reduce your chances of attaining a health insurance plan with low premiums that offers more affordable treatment and medication.