Everyone knows that bad credit can be a source of tremendous stress for those unfortunate enough to have it. It can make it impossible to get a loan, an apartment, a car, a phone, and even in some cases, a job. Our credit rating is essentially the gauge society uses to determine our credibility. While, it may not always be an accurate indicator of overall financial reliability, it is the system we have in place, and to ignore it is foolish. Bad credit offers a whole host of fees and additional charges that go with it. This can make the hole one is in feel even deeper. Most Americans have experienced financial difficulties at least once in their life. Job loss, unexpected repairs, medical expenses, etc, can all work to put even the most well intentioned of us behind the proverbial eight ball. The problem seems to generate a snowball effect; the further we get behind, the harder it is to catch up. Here are a list of some of the additional expenses one may encounter as the result of letting their credit rating deteriorate.
Higher Interest Rates
Having bad credit can make it very difficult to get credit cards offers or loans of any sort. However, if you are lucky enough to still qualify despite your poor credit, you will likely confront interest rates in the double digits as a result. Lenders view those with bad credit as riskier candidates for repayment, and higher interest rates are the levy they impose to mitigate such risk. This means one with poor credit, and likely less money, will in essence be paying more in the long run than someone with a good credit score. While sometimes it is unavoidable to take out such loans, particularly if one is in need of a vehicle or some other necessity, it would be wise to avoid more debt until other existing loans are paid off, and one's credit scores improve. Waiting until you improve your credit rating to take out new loans will not only provide more cash flow as your debt to income ratio is lowered, it will always keep interest rates to an affordable minimum.
Higher Insurance Costs
Even if you have a clean driving record and have never had an accident, your insurance company could charge a higher premium if you have bad credit. The theory behind them this is, it has been established that people with lower credit scores are more likely to file a claim than those with higher scores. Again, one's credit score is used as a gauge of overall credibility even if that gauge is not always accurate in a personal context. Keep premiums down by working on improving your overall score.
Additional Security Deposits
If you are fortunate enough to find an apartment with bad credit, a landlord may require a higher security deposit to compensate for the larger potential of failing to pay rent. In addition to the added costs of obtaining the apartment, utility companies such as phone, electric, gas, cable, etc., may also require a security deposit where they otherwise would not given a higher score. They may do this even if you have never missed a utility or rent payment in your life. Like with all lenders, your bad credit score sends a risky message to those doing business with you. Additional or higher security deposits are a reflection of that risk. Improving one's credit before renting a new place requiring utilities, and the additional costs associated with them is in your best interest. Although, of course, this is not always possible as everyone needs a roof over their head.
More Expensive Phone Contracts
It becomes increasingly difficult to enter a phone contract with poor credit. Therefore, for many struggling under such circumstance, prepaid plans are the only option. In today's world, a phone has become a virtual necessity. If you have bad credit however, you may not qualify for a standard cell phone contract as most, if not all, wireless providers are reluctant to extend monthly service to those proving unreliable at paying their bills. With standard monthly contracts not an option for those with bad credit, the only available route in order to have a cell phone is to purchase an expensive prepaid plan. While this may be the only option for those in desperate need of a phone, if you have poorer credit and can live without one, you should avoid these higher costs.
Even if you are not someone with a proclivity to ignore your bills, your credit score has a tremendous impact on your life. That is why it is so important, regardless of the plethora of obstacles life may throw at us, to monitor and repair our credit as soon as it has become damaged. The sooner we educate ourselves on the vastly beneficial results associated with a higher credit score, the sooner we can start taking the steps necessary to moving us toward financial freedom. These additional charges and expenses levied against those with poor credit ratings is just a fraction of the ways in which bad credit can make life extremely difficult. If you are feeling overwhelmed with your current debt situation, you are not alone. Many good and responsible people have found themselves in similar circumstances due to unexpected hardships. Educating yourself is the first step. Finding a reputable credit repair service can also be a wise decision. These companies can provide an invaluable service if you are feeling overwhelmed. A good credit repair company is experienced with dealing with lenders and debt collectors, and can help negotiate the best repayment plans to help you get back on track. Do not let bad credit continue to ruin your life. Learn as much as you can, be proactive and find experienced help if necessary to avoid the higher costs associated with a low credit score. This is your life; bad credit does not have to be a part of it.