5 Ways Having a Poor Credit Score Can Make Your Life Worse
by Natasha Gabrielle | Published on Sept. 18, 2021
Low credit can limit your financial opportunities.
Whether we like it or not, credit plays a big part in everyday life. If you want to be approved for a mortgage, car loan, or credit card, your credit score will play a big factor. Those with higher credit are more likely to have better financial options, such as access to low-interest loans or rewards credit cards with premium perks. Having a low credit score can be a barrier to those opportunities. Keep reading to find out how a poor credit score can make your life worse.
1. Low credit may limit your rental opportunities
As a renter, your options may be limited if you have a low credit score. Many landlords and rental companies require potential tenants to undergo a background check. That usually means they will perform a credit check to see if you have a satisfactory credit history.
Landlords will be less likely to rent to someone who may appear unable to pay their rent promptly, which they gauge in part by a credit check. If you have a low score or negative marks on your credit, you may not get approved.
2. You may struggle to get a job
Believe it or not, some employers do background and credit checks during the hiring process. If you have low credit, this may limit your job prospects. Employers in some industries want to hire employees who they believe are both financially stable and trustworthy with sensitive information. That may mean they choose to skip over applicants with low credit.
Here are some examples of industries that may run a credit check on applicants:
- Law enforcement
- Temporary jobs
- Your credit may impact your ability to get a mortgage
3. Your credit may impact your ability to get a mortgage
If you're hoping to take out a mortgage, you'll need to be in good financial standing. For starters, mortgage lenders want to see that you have enough income to pay off your loan. They will also look at your credit report and credit score to make sure you're ready for this life-changing financial decision.
Your credit score and credit situation will determine if you're approved for a home loan. Plus, it will impact the type of loan and terms you can get. If you're thinking of buying a home in the future, now is a good time to start working on improving your credit.
4. Your loans may have higher interest rates
If you can get a car loan or home loan with poor credit, your loan terms may not be as desirable as you wish. You may be stuck signing a loan with a higher interest rate. That means you'll pay more in interest charges throughout the life of your loan. Because of the high interest rates of some loans, having poor credit can be very expensive.
5. You may need to delay life goals
Depending on your credit situation, you may need to delay some of your life goals. If you have a low score, you may also have significant debt. If that's the case, it may make more sense to focus on paying off your debts as quickly as possible instead of taking on new loans. That could mean waiting on your other goals, such as saving up for a car down payment or setting aside extra funds for your future wedding.
Improving your credit is possible
Having low credit is stressful, and it can negatively impact your life. But you can work on improving it. Come up with a plan to boost your score and pay off any unpaid debts.
Here are some tools to get started:
- Credit card interest calculator: Find out how long it will take you to pay off your credit card debt within a set timeline, and see how much total interest you'll pay.
- Budget overview: If you need to create a budget but don't know where to begin, this guide can help you get started.
- Increase your credit score guide: Learn how to make changes to improve your credit score and reduce your debts.
- Best debt payoff apps: These can help you manage your debt payoff strategy with the convenience of mobile tracking, planning, and reminder tools.
With hard work and a plan, you can improve a low credit score. For more helpful financial tips, check out these personal finance resources.
Top credit card wipes out interest until 2024
If you have credit card debt, transferring it to this top balance transfer card secures you a 0% intro APR for up to 21 months! Plus, you'll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read our full review for free and apply in just 2 minutes.
About the Author
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.