Credit is a term that has been around for the past few decades. Your credit score affects everything you do and want to do, especially when it comes to big purchases such as a house or car.
We all know the higher the credit the better. We also know that if we have a low score we need to get it higher. But, why is that?
A low credit score deems you a risky borrower. Low credit scores can hurt you in more ways than you think. Here are some things you might not have known a low credit score could ruin.
1. Your Relationship
Money and kids are two of the biggest factors that can drive couples apart. If you hide your low credit score from your spouse, it can come back to bite you when you apply for a house loan, buy a car and even look at renting an apartment.
When you apply for a house loan, the mortgage company runs both your credit to see how reliable you are. If your shady score pops up, the lender will most likely give you higher interest rates and raise the minimum down payment to make sure you won’t default on your mortgage. If this is also how your spouse finds out your credit score, things won’t be so good. Be open and honest and together you can work to improve your score.
2. Your Chance to Buy a Home
As stated above, a low credit score can block you from getting certain mortgages, low interest rates and a lower down payment. If your credit is very low you may not be able to buy a home. This is a major hindrance, especially if you found your dream home.
If you are considering buying a house, go talk with your lender and see where you are at. They can help you make a plan to get that score up so you can buy the home of your dreams.
3. Approval for an Apartment
Believe it or not your low credit score could make it hard for you to rent. Landlords do run credit checks to see how reliable of a renter you would be. If your credit history shows a lack of consistent payments or even paying off of debt, that could mean you won’t pay your rent on time and therefore not a good renter.
4. Your Dream Job
This one can really hurt you and can come out of the blue. You could be the perfect fit for the company, aced your interview then not get the job because you didn’t pass their credit check. Most employers will run a credit check as well as a background check. A low score could be a red flag for the potential of embezzlement, untrustworthiness and reliability.
5. Starting Your Own Business
Should the entrepreneurial bug bite you, a low credit score could mean not securing the business loan or line of credit to operate. As businesses start out they rely on the owner’s line of credit to get started and then build its own as the business grows. Low credit score means higher interest rates and a harder time securing the proper financial channels for your business.
These are milestones that have a major effect on your life. The good news is that it’s possible to raise your score. It does take time and creating better financial habits, but it can be done. Discuss your situation with a financial planner, lender, or a financially responsible friend and they will help you find where to start and how to go about getting that score up.
Do you have a low credit score? How has it affected your life? What have you done to correct it?
Photo courtesy of: albertoadan