The Perks and Pitfalls of Having Credit

In last month’s issue of Living Out, we took a look at the importance of a credit score and how it reflects your credit worthiness. This month, we go a little deeper and offer up some of the pluses and minuses of having credit that will hopefully stay in mind and help you better navigate your way through the financial waters. Rates on Your Credit Cards and Loans

Creditors and lenders see bad credit applicants as riskier than applicants with better credit scores. They make you pay for this risk by giving you a higher interest rate. Over time you’ll end up paying more in interest than you would if you have better credit and a better interest rate. The cost is higher with big credit card balances or major loans.

Better Chance for Credit Card and Loan Approval

Because creditors and lenders think your bad credit is a risk, they might not want to lend to you at all. You may find that your applications are being denied.

Security Deposits on Utilities

Utilities companies – electricity, phone, and cable – check your credit as part of the application process. If you have bad credit history, you may have to pay a security deposit to establish service in your name.

Difficulty Getting a Job

Certain jobs, especially those in upper management or the finance industry, require you to have a good credit history. You can actually be turned down for a job because of negative items on your credit report, especially high debt amounts, beankruptcy, or outstanding bills.

AutoDifficulty Purchasing a Car

Many car dealers and loan lenders will check your credit before giving you a car loan. With bad credit you might get denied or you might get approved with a higher interest rate. Most of those “no credit check” car lots charge you extremely high interest rates that make it difficult to make your car payments.

Higher Insurance Premiums

Insurance companies check credit too. They say that lower credit scores are linked to higher claims filed. Because of this theory, they check your credit and charge a higher premium to those with lower credit scores, regardless of the number of claims you’ve filed.

Difficulty Starting Your Own Business

Many new businesses need bank loans to help fund their startup. A bad credit history can limit the amount you’re able to borrow to start a new business.

Difficulty Getting Approved for an Apartment

Who knew landlords checked credit before allowing you to sign a lease? It’s true. Having bad credit can leave you without a home.

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