How Does Having Bad Credit Affect Me?
submitted: Aug 25th 2008 |
by: StevenJ.Talrechi |
Total views: 1 |
Word Count: 483 |
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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.
Who decides your FICO score? This is done by the "big three" credit reporting bureaus, Transunion, Equifax and Experian.
Financing opportunities A less than satisfactory FICO score will make it tough for you to get financing. You may have a very hard time getting a mortgage, car loan or personal loan. Having a bad credit history tells prospective lenders that you are a high risk for a loan or that you might not be able to repay a loan 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 once faced a situation where I was trying to get a consolidation loan. My credit score was not as good as it should have been and as a result, I would have been paying an interest rate of 24.99%! This is a very high interest rate, $25 for every $100 of outstanding balance each year, or $250 on my balance of $1,000!
Personal health and well being The financial ramifications of having bad credit are bad enough, but there are other things to consider. If you have bead credit, you are probably already in debt. You may be getting mail from creditors or even harassing phone calls from collectors. This creates stress and strain on even the hardiest of people.
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.
Bad credit can even take a toll on your health and cause you many problems. High blood pressure and even heart attacks are not unheard of; so be careful with your credit and take care of it - you'll be glad you did.
About the Author
Steven J. Talrechi has been studying credit reporting and credit reporting practices for over a decade. He specializes in helping others with second chance banking and obtaining a checking account when they have been turned down by banks.
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