The Costly Consequences of Bad Credit

It doesn’t take much for your credit status to turn upside down. A missed payment, loss of employment, medical emergency, or impulsive financial decision can send your credit history from excelling to poor in just 30 days. Depending on how bad the situation is, improving your credit can take months or even years.

Everyone knows that if you have bad credit, it can be nearly impossible to get approved for credit cards, home loans, and some jobs, yet what they don’t often talk about is how costly it is. Realizing that the consequences of bad credit are larger than not being able to finance a brand-new car or house is the first step to acting and improving your score. Here’s a look at just how much it costs when you have a negative credit status.

Higher Interest Rates

For those who have bad credit, getting approved for a loan is nearly impossible. If they are able to find a lender willing to extend some help, it comes at a cost. Their poor credit history paints them as a high-risk borrower. Lenders are automatically going to charge them more in interest to make sure that they can recuperate as much of the loan as possible.

Deposits

When applying for certain services, people with poor credit will have to pay more than those who have better credit histories. Utility services, television services, and even cell phone services will require a deposit before the customer can receive service. The deposit can be hundreds of dollars depending on how bad your credit is. The same goes for rental properties and secured credit card offers.

Increased Insurance

If you have bad credit and drive a car, then there’s something you should know. Car insurance companies use your credit score to determine your rate, which means that you are paying a higher insurance premium. A poor credit history symbolizes a high-risk driver which provokes companies to charge more per year to keep you protected.

What to Do About it

Didn’t realize just how much more you paid for having bad credit, did you? Now that you’re aware, what are you going to do about it? If you answered improving your credit, you’re on the right track. Here are some effective tips to getting things back in order:

  • Credit Starter Loans – Financial Institutions like http://westernshamrock.com/, offer customers with bad credit a second chance. They have credit starter loans which can be used to show positive history on your credit. If approved, you make monthly payments until the loan amount you’ve been approved for is reached. Then, the funds are deposited into an account for you to use at your discretion.
  • Secured Credit Cards – Although you’re going to pay more for it, secured credit cards are another option for rebuilding your credit. These cards require collateral, which is usually in the form of a cash deposit which also serves as the credit limit. You pay the amount upfront and have a credit card you can continue to use.
  • Ask Someone Else – If you have a trusted friend or family member who has good credit, you can ask for their help. By adding you as a co-borrower on their account, they can help boost your credit. If they add you to a credit card and also allow you use of it, be sure that you are responsible so that you don’t make everyone’s credit bad.
  • Clean Up Your Mess – As you’re tapping into all of these opportunities to boost your credit, you also need to clean up your mess. This means reviewing your credit history and getting rid of the negative marks. Contact service providers and negotiate new rates and payment arrangements, boost your income with a side hustle to pay down debts faster, and even consider debt consolidation services for help.

Just because you already have a house and a car doesn’t mean you shouldn’t care about your bad credit. Negative credit histories do a lot more than impact your ability to get a loan, it also makes life a lot more expensive. If you want to stop paying for bad credit, you need to do the work. This includes a combination of cleaning up your credit history and finding opportunities to boost your score.