You just found a new apartment that you love. It's new, close to work, near shopping and twice the size of your current place – and it costs less. So, you put in your application and wait for the formal "yes" to come through so you can arrange your move. But the approval never comes. Why? Bad credit.
A landlord has a stake in your financial health. Bad credit makes you a risk – a risk a lot of landlords are not going to take. Since it takes longer to fix bad credit than it often does for it to become a problem, the effects are long-lasting and can be severe.
In addition to losing a desired apartment, here are four other ways bad credit can ruin your day:
It might not make sense on the face of it, but most insurance companies, while factoring their price quotes, consider an applicant's credit. It is considered by many insurers to be a predictor of the risk of claims. The result of that credit check, if you have bad credit, is sure to wipe away any smile from your face the day you get the quote.
The Consumer Federation of America, which has championed the fight against using credit, occupation, education and income as criteria for insurance price setting, found that consumers in most states will be charged more due to credit concerns. The federation found in a sampling of quotes in three Texas cities that one insurer increased its rates by 25 percent when an applicant had bad credit. Two other insurers boosted rates by more than 10 percent. Only one, which still charged more, increased the premiums by less than 5 percent.
When you have bad credit, one thing that can go a long way toward helping fix the situation is making more money. For many folks, the best chance to do that is to get a better, higher paying job.
Not every company runs them, but the more responsibility the job has – and the more it has to do with money – the more likely it is that they will. About 13 percent of employers run credit checks on all applications, according to the Society for Human Resource Management. Another 47 percent will use credit checks for only specific jobs, the organization found in a survey. The most common use of the credit checks – they're looking at credit reports, not credit scores – is for those who would have access to money or sensitive information.
This is where bad credit can really feel like a trap. You are qualified for a job that pays more and will help you pay off your debt, but you can't get it because you haven't managed your debt well.
When you have bad credit, the implications can often come at unexpected times. One of those is when you go to get a cell phone. For most folks, you turn in an application, pick a phone – often for free – and you sign a contract. Bad credit can alter that.
If the cell phone carrier isn't happy with what it sees when it runs your credit report, you could be asked to pay a deposit in order to get a contract or be rejected altogether.
One way consumers are punished for having bad credit is by lenders willing to provide them credit making it a lot more expensive to borrow. A preferred customer could be looking at an interest rate of 10.9 percent or 11.9 percent while someone with bad credit could be charged 22 percent interest or more with low limits of a few hundreds of dollars instead of thousands – as well as face monthly fees.
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