Getting a low credit score can happen to anyone. There are many unexpected events that may cause some damage to your financial history. While you shouldn’t blame yourself for getting a low credit score, it is super important to find a way to increase your credit score as soon as you can.
Having a bad credit score can mean a lower approval rate for loans and a higher interest rate charge, increasing the cost of the loan. It is important to understand that credit scores are used by many different places such as utility companies, insurance companies, landlords, and employers, which increases the cost of goods and services for you.
Here is what the consequences of having low credit could be:
Limited Credit Card Options
Having a bad credit score can significantly affect your options. Even though there are plenty of companies that offer credit cards to those with lower credit scores, they often don’t have the same benefits as other credit cards and will often have higher interest rates.
With a higher credit score, you will be able to access many credit cards that offer different perks, helping you maximize your benefits and save money in return.
Increases the cost of insurance
Not many people know this, but having a lower credit score can affect the cost of your insurance. Similar to lending companies, insurance companies use statistics to determine the likelihood of certain events happening.
Studies have shown that individuals with lower credit scores tend to file more insurance claims compared to those with higher credit scores who file fewer claims. Because of this, insurance companies use credit-based insurance quotes to determine insurance rates, and if you have poor credit, you might receive a higher insurance quote.
Increase the cost of car loans & Mortgages
Lenders typically fear giving out loans to individuals with poor credit scores, fearing that they will default on their loans. Having a low credit score can really hurt your chances of approval for any kind of loan, or you might face higher interest rates, increasing the cost of the loan drastically.
Having a high credit score shows that you are responsible with your finances and most likely will not miss your payments, showing the lender that you are a low-risk borrower.
Having a lower credit score can really affect your day-to-day life because many businesses and services look at your credit score. If you’re looking to move into a new apartment, due to the high demand for housing, landlords are becoming more selective about who they are willing to work with.
Many apartment complexes have a credit score minimum to determine which individuals they are willing to work with, and this can affect your chances of getting the apartment of your dreams. Higher credit score individuals have a proven track record of making payments on time, and that is strongly looked at by landlords. Other things a low credit score can affect are your utility costs and job applications, and you might have a harder time obtaining business loans.
While having a low credit score can affect your life, there are many things you’re able to do to stop overpaying and increase your credit accounts.
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