A credit score is a value used by lenders and companies to see how financially trustworthy you are. It’s affected by factors such as when you pay your bills, how much money you borrow, and how much credit you use.
Most people don’t understand the importance of maintaining a good credit score. In fact, a report showed that 53% of households in the UK have never checked their credit report. It’s important to know how high your credit rating is, as a low one can affect your life in many ways. Here are some of the drawbacks of having a bad credit score.
Limited Borrowing Options
When it comes to getting a loan, a bad credit score can affect your options for the worse. Lenders often check your credit score before giving you money. Many will choose not to give you a loan if you have a bad credit score.
Having a bad credit score can often make your financial habits look worse than they are. Lenders will assume you can’t be trusted with money. It can make it much harder to get a loan when you need it. However, some companies look beyond these scores and offer poor credit personal loans for those who need it.
Your borrowing options can also be affected in other ways. Some lenders might require you to secure your loan against an asset such as your house. You may also have to deal with higher interest rates. When it comes to borrowing, a low credit score is also better.
Buying/Renting Accommodation
A poor credit score can also affect your living options. You might have trouble getting a mortgage, and some real estate agents may also be hesitant to deal with you. It’s not impossible to buy a home with a bad credit score, but you might still have to deal with higher down payments.
It can also affect your renting options. Landlords may not wish to rent to someone with a bad credit score. It gives the impression that they’ll be late with payments or be unable to make them. Once again, it won’t be impossible to find somewhere to rent. But your options will be limited, and you may have to settle for somewhere much less desirable.
It can even make your holidays more expensive. People might be hesitant to rent holiday homes to you. You might also have to deal with higher deposit fees.
Higher Insurance Costs
Insurance costs are one of the most crippling expenses for most people. Car insurance can take a significant chunk out of your income. Home insurance can also be expensive. These costs can be even higher when you have a poor credit score.
Car insurers take many factors into account when calculating your costs. Your age, the time you’ve been driving, and your car can all have an effect. Many insurers will also check your credit rating. If you have a bad credit history, you may be charged more, or they may refuse to insure you.
The same also applies to other kinds of insurance. You might be able to get a better deal by using an insurance broker. But suffice it to say, it’s always better to have a higher credit score.
