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How Does Having Bad Credit Affect Me?

By: Steven J. Talrechi

Good credit - it means many different things. There are a number of advantages to having good credit; these are pretty obvious. While getting and maintaining good credit involves a high degree of fiscal discipline and making payments, it is well worth the effort. So how does bad credit affect you? What are the disadvantages of having bad credit? This is a question which it takes more than a few words to 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.

These scores are calculated and reported by the "Big Three" credit reporting agencies, which are Transunion, Experian and Equifax.

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.

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 once faced a situation where I was trying to get a consolidation loan. My credit score was not as good as it should have been and as a result, I would have been paying an interest rate of 24.99%! This is a very high interest rate, $25 for every $100 of outstanding balance each year, or $250 on my balance of $1,000!

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.

You might have trouble sleeping, depression, loss of appetite or any of a number of other stress related symptoms. All of this because of some money troubles. While your finances are indeed important, so is your physical health.

Conclusion In conclusion, having bad credit affects your financial opportunities in every area. From buying a home to borrowing for junior's college expenses, you may have a lot of trouble with the money. Everybody wants to have nice things and bad credit will keep those things from coming your way.

Having bad credit can also have a negative impact on your health, causing a lot of difficulties. High blood pressure and heart attacks can even be caused by stress, so make sure to guard your credit and take good care of it - and yourself.

Article Source: Main Articles

Steven J. Talrechi has been reporting on credit and credit practices for over 10 years. He is an expert in assiting others with second chance banking and obtaining a checking account when they have been turned down by banks.

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