When you purchase something against a credit card it gives you instant gratification to get something without having to spend cash. Similarly walking through a newly renovated and redecorated kitchen feels surreal which was possible due to the loan you got from a lender. But when you feel happiness while making things possible through using a credit line, you intend to forget the amount of money you will have to repay because it wasn’t your money in the first place.
Paying off loans on time is not only a matter of integrity but it can cause you many troubles other than paying penalty charges for not paying your dues. Its importance is associated with the credit score you earn according to your credit history. A bad credit score let’s say 540 can cause you a lot of hindrance in your life financially. Here is a list to make you aware of the consequences you would have to face if your credit score is not good:
1. Loan Approval
The bad credit score has a direct effect on the ratio of approval of a new loan you want to apply for. Lenders tend to reject loan applications that have a bad credit score as they are considered risky. Even if somehow your loan application is approved you will have a high interest or mortgage rates and stricter credit conditions at your hands. A Bad credit score also creates problems for businesses and start ups to get loans for their business purposes as they are already considered a risky investment.
If your credit score is below average or bad, then it will not only impact your loan approval but it will also affect the ability to rent an apartment or applying for an apartment lease. It is because your landlord will run a credit check which will show a bad credit score. The people who have a bad credit score are likely to be unable to pay their rent on time, so landlords end to steer clear of such tenants that might cause them trouble in the long run. So if you have a credit score as low as 540, you might not be able to rent a house or apartment in a nice neighbourhood.
3.Problem in Getting a Job
A bad credit score comes in the way of getting a job. An employer will run a credit check of the potential employees. The employer can deny you a job on the basis of your bad credit score and they are supposed to inform you that why you were not hired. It is more prevalent in the financial industry where your financial health is more scrutinized and put emphasis upon.
4.Higher Insurance Premiums
If you have a bad credit score you will have to pay higher premiums on your auto or home insurance policies. This is because insurance companies factor credit score while making insurance policies. Thus you will have a higher premium rate on a policy which otherwise would have been lower in case of a good credit score.
5.Effect on Relationships
As the money lenders won’t be willing to give you loans it might affect your marriage when you won’t be able to qualify for a loan with your spouse or you won’t be able to pay back the money to your friend as promised. It will cost you your relations
In short it is very important to keep your credit score in the good to excellent range, as a bad credit score will get you nowhere. So start paying your dues on time and if you need any more information on tackling your finances feel free to contact us.