credit & debt

5 Surprising Ways Bad Credit Can Hurt You

A low credit score and poor credit history can do more than just affect your ability to get a loan.

A poor credit history can make it tough to borrow money. Dings on your credit report – late or missed payments, or accounts in collection – can hurt your credit score, which is a factor lenders use when determining whether to extend credit to you. The lower your credit score, the more of a risk you’re considered to be. And the riskier borrower you are, the more you will pay in interest – if you can get a loan at all.

Lenders aren’t the only ones who are looking at your credit score and history. In fact, you might be surprised how much of an impact bad credit can have on many aspects of your life. Here are five examples:

You might pay more for insurance. Insurance companies consider credit reports and scores when pricing coverage for auto and homeowner’s insurance, says John Ulzheimer, credit expert for Credit Sesame, a Web site that offers information and advice on credit and debt. Insurers typically offer discounts for those with high scores. If you don’t meet the insurer’s threshold (which varies from company to company), you’ll miss out on the good credit discount and pay higher rates as a result. Even worse, poor credit can lead to denial of coverage, Ulzheimer says.

Utility companies might require a deposit. Public utilities won’t deny services except in extreme situations, Ulzheimer says, but they can insist on deposits. The decision to charge a deposit (or waive a deposit requirement) is largely based on a customer’s credit report, he says. Remember, utilities are billing you for water, gas, electricity and other services based on the actual amount used, so they need assurances that you can be trusted to pay for what you've already consumed.

You might have trouble getting a cell phone. Wireless carriers will check your credit if you want to buy a cell phone with a service contract, says Gerri Detweiler, director of consumer education for Credit.com. If your score is low, it’s an indication that you haven’t handled credit well – and, therefore, might not be a reliable customer. So wireless carriers might charge you a deposit (or higher deposit than what they charge customers with better credit), she says. Or they might limit your options to the most basic service or a pre-paid phone plan. You could run into a similar problem with cable TV and Internet providers, Ulzheimer says.

You might get turned down for a job. According to the Society for Human Resource Management, 47% of employers consider credit history when making hiring decisions. Credit history isn’t the most important factor employers weigh when deciding whether to hire someone, but it can play a role, according to the SHRM report. Employers who conduct credit checks typically do so to reduce theft or other criminal activity. But nearly 20% of the employers surveyed by SHRM said the primary reason they look at the credit histories of job candidates is to assess their overall trustworthiness.

You might have trouble finding a home. Property management companies screen prospective tenants before handing over the keys to an apartment or house, Ulzheimer says. If you have poor credit, you might have to pay a bigger deposit. Or you might have your lease application denied, he says. Home buyers need a credit score of 740 or more to get the best rates on a mortgage, Detweiler says. Not only will your rate be higher if your score is below 640, she says, but your loan options will be limited, which might put home buying out of reach.

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