How Does Having Bad Credit Affect Me?
by: StevenJ.Talrechi |
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Having good credit means a lot of things to a lot of people. The positives are numerous and self explanatory. Granted, they bring with them payments, interest rates and a need for effective management. The question arises as to what having bad credit means to the consumer and this is a many faceted situation.
Credit and lending institutions use something called a FICO score to determine your eligibility for ANY financial request. Typically a score of above 720 is considered excellent and will qualify you for just about anything you ask for. When you go under about 650, it gets patchy for most consumers.
It is the "big three" credit reporting agencies who calculate your credit score. These companies are Equifax, TransUnion and Experian.
Financing opportunities A bad FICO score will prevent you from obtaining financing in every market. Try obtaining a mortgage to buy a house and you will be hard pressed to get that loan. The same thing applies to personal loans and car loans. Basically, a bad credit history tells lenders that you are a high risk and can't be trusted or are otherwise unable to pay the loan back in a timely manner.
Interest rates The real problem with a bad credit history is higher interest rates.
Your FICO score will determine the interest rate you'll be able to get. While a good score can get you rates between 7% and 9%, if you have a bad credit history you can still get financing in many cases - but at a much higher interest rate.
I personally had a situation some years back where I was applying for a debt consolidation loan. I had a credit score which was not what it should have been and as a result, I was offered a loan with a 24.99 interest rate! This is $25 per $100 dollars of outstanding balance or a whopping $250 on my $1,000 balance!
Personal health and well being Having bad credit has enough bad effects on your financial situation. However, there is also a considerable degree of mental strain which can be caused. Having bad credit means that you are likely in debt as well; this can cause a lot of stress which can have effects on your health.
Stress can cause depression, lack of appetite and trouble sleeping among other stress related difficulties. While it is important to look after your finances, your health is even more important.
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.
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About the Author
Steven J. Talrechi has been writing about credit and credit practices for over a decade. He is an expert in helping others with second chance banking and obtaining a checking account when they have been turned down by banks.
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