It's no secret that a low credit score -- usually considered any score under 630 -- can impact your ability to get loans and credit cards. But these days, it can affect a lot more than that.
Your credit score is a grade of your financial responsibility and increasingly, it's being used as a measure of your overall responsibility in life. Here are a few surprising ways your bad credit score could be hurting you.
Your bills will be more expensive
Utility companies, insurers, and even cable and cellphone providers do a credit check before taking you on as a customer. They want to ensure that you'll be able to pay your bills when the time comes, before they go through all the trouble of setting up your service.
If you have a poor credit score, these companies will often charge you a higher rate to account for the increased risk. You also may have to pay a security deposit for your cable or cellphone, which the company will keep if you fail to pay your bills.
You may have trouble getting a job
Employers are increasingly running credit checks on job candidates as a way of assessing their trustworthiness and responsibility. They're especially common among jobs where employees have a lot of responsibility or may be involved in spending or managing company funds.
Employers are looking for red flags like civil judgments against you, bankruptcies, or a high credit utilization ratio. These things may indicate to an employer that you're not responsible with your money and therefore may be irresponsible with the company's money. A prospective employer may also look at your poor credit score and make assumptions about your ability to manage a lot of responsibility as an employee. So even if you have all of the right qualifications, you may still get passed over for the position.
You may not be able to live where you want
Everyone knows that banks look at your credit reports when considering you for a loan, but landlords also look at them when considering you for a rental for the same reasons. They want to make sure that you'll be able to pay your rent every month so their own investment is protected. A low credit score signifies that you may have trouble keeping up with the monthly payments.
Your relationships might suffer
More than 4 in 10 Americans say that a low credit score is a dealbreaker in a relationship, according to a Bankrate survey. It can make your partner question your financial responsibility and your responsibility in general.
It can also affect your relationships with family members and friends. If you're turned down for a bank loan, you may turn to them for the money, instead. Falling behind on payments, or failing to pay back the debts altogether, could put a serious strain on the relationship or may even end it.
How to fix bad credit
If your bad credit score is negatively impacting your life, don't worry. There are things you can do to fix it. The first step is to pull your credit reports to see where you're at. Everyone is entitled to one free credit report per year from each of the three credit bureaus through AnnualCreditReport.com. Look through it, and make sure everything in there is accurate. If you find accounts that don't belong to you, contact the credit bureau and the financial agency immediately, and put a fraud alert on your credit report.
Then, look for areas where you could improve your credit. Your payment history is the single most important factor in determining your credit score, so make sure you make at least the minimum payment on all of your bills by their due dates.
Your credit utilization ratio -- how much credit you use vs. how much you have available -- is the second most important factor in calculating your score. Ideally, you should use 30% of your available credit or less, and the lower the better. Do what you need to do to get yourself within that range, whether it's curbing spending or applying for a credit limit increase. However, you should note that you may have trouble getting a credit limit increase if your credit is bad.
Pay off any debts you have, starting with the highest-interest debt first. Debt-to-income ratio is especially important when applying for a loan, so reducing debt will increase your chance of approval.
Bad credit hurts more than your chances of getting a mortgage or credit card. It can make virtually every aspect of your life harder. But by buckling down and taking steps to improve your credit, you can save money and open up the doors to a host of new opportunities.
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