The Cost of Bad Credit
Bad credit costs you in more than the extra interest you have to pay. Bad credit can lead to reduced opportunities, family stress, and having to associate with lenders who see you as a mark. Here are some of the unpleasant consequences of bad credit.
Fees: Creditors may add fees, such as late fees, over-limit fees, legal fees, repo fees, penalty fees, deficiency payments, and default rates, to your balance.
As bad as the fees can be on your credit cards, they can be even worse on your secured loans. If you fall behind in your house payment, you can be hit with huge fees to the tune of thousands of dollars.
Higher interest rates: The lower your credit score, the higher the interest rate you have to pay. Making matters worse, the policy of universal default says that if you have an issue with one lender, all your lenders can hike your rates, even though you’re still paying the others on time and as agreed.
Less than favorable loan rates: In a time of tight credit, you may not qualify for a loan at all.
Lost employment opportunities: Increasingly, credit checks are a standard part of the hiring and even the promotion process at companies large and small throughout the United States. Businesses reason that the way you handle your finances is a reflection of your behavior in other areas of your life.
Higher insurance premiums: A strong correlation exists between bad credit and reported insurance claims. Insurance companies run a credit check when determining your premium, so bad credit may cost you a bundle in insurance-premium increases or result in your insurance being denied.