How can poor credit hurt you? Let us count the ways…There are at least ten of them according to a recent Lynnette Khalfani-Cox article in the AARP.org Money page. Your credit score is something to keep in mind when getting homeowners or auto insurance, purchasing a home or finding a job – it may even affect your love life! Here are ten areas that you need to be aware –and vigilant—of:
Car Insurance Premium
If you thought car insurance companies kept tabs only on your driving record to determine how much you’ll pay for coverage, you’d be wrong. Insurers check your credit report — and poor credit drives up your premium.
Mortgage Interest Rate
If you’re in the market for a home loan and your credit is spotty, you’ll likely pay tens of thousands of dollars more in finance charges. Over a 30-year term, a lower credit rating on a $300,000 home loan with a rate of 3.965 percent may cost you and extra $103,000 in interest charges.
Homeowners Insurance
Just as car insurance companies review your credit rating, so do companies that provide homeowners insurance. The National Association of Insurance Commissioners reports that 95 percent of auto insurers and 85 percent of home insurers use credit-based insurance scores in states where it’s deemed an underwriting or risk classification factor.
Employment
Poor credit could cost you a job opportunity. A 2012 study from the Society for Human Resource Management found that nearly half of U.S. employers use credit checks on some or all of their job applicants. So if your credit history isn’t so great, that could scare away potential employers and make it harder to find work.
Government Clearance
Enlisted personnel and certain federal workers need to maintain good credit in order to obtain various government clearances. Having bad credit could derail military members or government employees who are seeking promotions or career advancement opportunities.
Your Love Life
A staggering 75 percent of women, and 57 percent of men, say credit scores play into their dating decisions, according to a survey of 1,000 single adults from FreeCreditScore.com. Most respondents said money management skills were just as important as looks in deciding if someone was worth pursuing.
Your Physical Health
Financial stress can lead to headaches, sleepless nights, muscle tension and other maladies. Researchers have even discovered that fretting over financial matters negatively affects people’s brains, partially because such mental distractions make you lose focus.
Private Student Loan Rates
Federal student loans have interest rates that are set annually by the government. That’s not the case with private loans. If you’re considering going back to school to boost your marketability and have a poor credit rating, your student loan interest rates could soar into the double digits if you take on a private loan.
Credit Card Options
Applying for a credit card almost always requires a credit check. If your credit is somewhat blemished, a bank may offer you a credit card with an above-average interest rate. If your credit is worse than that, you may be offered a credit card with an interest rate of 20 percent or more.
Your Good Name and Reputation
It’s one thing to have bad credit with traditional lenders like banks, credit unions and other financial institutions. But if your repayment track record is seriously tarnished, you may even have a bad reputation with family and friends, making it far more difficult to convince relatives to come to your rescue if a financial emergency arises.
