You just found that perfect apartment that you love. It’s new, close to work, near shopping and twice the size of your current place – and it costs less. Without hesitation, you apply and wait for the formal “yes” to come through so you can arrange your move. But the approval never comes. Why? Bad credit.
A landlord has a stake in your financial health. Bad credit makes you a risk – a risk a lot of landlords are not willing to take. Creating bad credit is quick and easy, with effects that are long-lasting and can be severe. Fixing bad credit, however, is generally a much longer process.
In addition to losing a desired apartment, here are four other ways bad credit can ruin your day:
Car Insurance Rates Increased
It might not make sense on the face of it, but most insurance companies, while factoring their price quotes, consider an applicant’s credit. Credit scores are considered by many insurers to be a predictor of claims risk. The result of that credit check, if you have bad credit, is sure to wipe the smile from your face the day you get the quote.
The Consumer Federation of America, which has championed the fight against using credit, occupation, education and income as criteria for insurance price setting, found that consumers in most states will be charged more due to credit concerns. The Federation found in a sampling of quotes in three Texas cities that one insurer increased its rates by 25 percent when an applicant had bad credit. Two other insurers boosted rates by more than 10 percent. One, which still charged more, only increased the premiums by less than 5 percent.
Job Prospects Damaged
When you have bad credit, the one thing that can go a long way toward helping you fix the situation is by making more money. For many folks, the best chance to do this is to get a better and higher paying job.
Many companies now run credit checks when you apply. These credit checks are examinations of the credit reports, not credit scores. Although not every company does this, chances are that the more responsibility the job has, and the more it has to do with money, the more likely the company is to run a credit check. About 13 percent of employers run credit checks on all applications, according to the Society for Human Resource Management. This organization found that another 47 percent will use credit checks only for specific jobs only. The most common reasons they use credit checks is to review people who would have access to money or sensitive information.
Here is where bad credit can really feel like a trap. You’re qualified for a job that pays more and will help you pay off your debt, but you can’t get it because you haven’t managed your debt well.
Cell Phones More Expensive
The implications of bad credit can often come at the most unexpected times. One of these times is when you purchase a new cell phone or cell phone plan. For most folks, the process is simple: turn in an application, pick a phone – often for free – and sign a contract. Bad credit can alter that.
If the cell phone carrier isn’t happy with what it sees after reviewing your credit report, you may be asked to pay a deposit in order to get a contract. Other times, you could be rejected altogether.
Higher Credit Card Interest Rates
Another way consumers are punished for having bad credit is through lenders willing to provide credit but making it a lot more expensive to borrow. A preferred customer could be looking at an interest rate of 10.9 percent or 11.9 percent while someone with bad credit could be charged 22 percent interest or more with low limits of a few hundreds of dollars instead of thousands – as well as face monthly fees.
So remember, the best way to avoid having bad credit is to pay every bill on time, and don’t spend more money than you make.