The implications of bad credit can be far reaching than many people think
. The obvious implications are the higher interest rates that you have to pay on your debt. However, bad credit can have a detrimental effect on your financial health. It can restrict your freedom to live the life you want because you can no longer afford or qualify for that loan to pay for a holiday or a new car.
To help you fully understand the consequences of having bad credit the following are a list of possible implications:
1) With a bad credit record you will be marked out by creditors, banks and other lenders as a greater risk. They will see you as someone who will have difficulty paying back the loan and they will ironically charge you higher interest fees. They could also add extra charges if you default on your loan or you delay payment. These charges can consist of late fees, overdraft fees, default charges to name but a few. These fees can be higher if they are based on any secured or unsecured loans that you have. For example, if you miss one of your mortgage payments you can be liable to pay hefty late payment charges.
2) Having bad credit means you have will a very low credit score. Many lenders use the credit score to determine how much of a risk you are in terms of paying back your debt. If you have defaulted in the past then that is going to show up as a black mark on your record. This means that if you are lucky enough to be accepted for a loan you will be charged at a higher rate than normal. You have also got to remember that most lenders use this credit score system which means you could be charged a higher rate from most lenders.
3) A bad credit record can also reduce your chances of being accepted for a loan and this risk will increase in times of recession.
4) Many companies are now using credit score ratings as part of their screening process when employing new staff. The reason for this is because businesses consider how well you handle your finances will reflect on how well you perform on the job. If you have applied for a job and your competing for a top position against others who have a better or higher credit score than you then, that may have a deciding influence on whether you get the job or not.