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Is there any reason not to go spend your limit on all of your credit
cards and to stop paying your bills? The not to suppressing answer is
yes, what is surprising is that many Americans still do just that.
So what effect is this behavior going to have? First off, credit card
payments and your level of debt have the highest impact on your credit
score. Once these areas are messed up your free
annual credit score will free fall.
Here is the problems that result from having that low credit score and
the reason that a bad annual credit report can make life more difficult
and cost a lot of money.
Applications for credit and loans may be rejected
Again, you are considered a risk if you have a bad annual credit report
and you may be outright rejected for credit and loans. This could cause
you to miss the boat on getting a line
of credit or a mortgage. Without a mortgage you can't buy a house,
and this can cause you to be a renter instead of allowing you to build
your own home equity. But, at least you can still rent right, well maybe
not…
Applications to rent rejected
Landlords frequently check possible tenants credit before allowing them
to rent. So you might not be able to even get an apartment with bad
credit.
Have to make security deposits on utilities
If you have a bad credit rating than Utility companies will make you
pay a security deposit before they will turn on your services. That
means you will have to have a significant amount of money upfront just
to get your electricity, phone, gas and cable turned on.
Can’t
get a Cell Phone
Cell phone companies don’t want you as a customer if your credit
score is low. They generally bill customers monthly and they won’t
want to extend this credit to people with bad credit. You could
be denied employment
Companies often check the credit records of possible employees to see
how responsible they are with their personal finances to ensure they
higher responsible employees. This is particularly true in the finance
and banking industries.
Higher Insurance Costs
Insurance companies have found that people with lower credit scores
are linked to higher claims. To make up for this they check your credit
and charge higher premiums to those with low credit scores, despite
your personal history.
Difficulty Starting a Business
New business frequently require capitol (money) to get going, banks
are usually the source of these funds. Having a bad credit score makes
the banks think that you and your new business are a risk and may cause
them to reject your loan application, and they will definitely be looking
at your annual credit report.
Difficulty financing a car
Getting an auto loan with a bad annual credit report may not be possible
or it can result in higher interest rates. This generally translates
into higher monthly car payments and less money in your pocket though.
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