In the current financial landscape, we cannot overstate the importance of having a healthy credit score. Your creditworthiness can affect multiple aspects of your daily life and plays a vital role in shaping your financial future. That’s why it’s crucial to maintain it.
Consequently, having a bad credit score may adversely impact other aspects of your life. For example, you may be charged higher interest rates or receive more expensive terms on credit cards.
While you may know that it’s not good to have a bad credit score, you may not be aware of the various ways in which an unfavourable credit score impacts your daily life.
That’s why, we’ve put together this blog to help you better understand some of the unexpected ways a bad credit score may end up costing you money. This will help you become prepared and know what to expect in different financial scenarios.
Let’s get started!
1) Higher Insurance Premiums
If you have a good credit score, you’re likely to receive lower insurance premiums. However, were you aware that having an adverse credit score can negatively impact your insurance premiums as well?
Typically, insurance companies believe that individuals with bad credit scores are more likely to file claims. As such, they charge higher premiums to such individuals.
Although it may seem unfair, with regards to car, home or rental insurance, you could find yourself paying more, solely due to your bad credit score.
2) Difficulty with Renting Properties
A bad credit score can even jeopardise your living situation. While this statement alone sounds almost too farfetched to be true, it is.
Landlords and property owners generally require detailed financial information from any applicants they may be considering.
While looking at rental applications, landlords often carry out credit checks on potential tenants as a means of assessing their reliability. As such, having a poor credit score may raise concerns regarding your ability to pay rent on time.
If they find you to be a ‘risky tenant’, many landlords are likely to either straightforwardly reject your rental applications or request additional security deposits. In some cases, they may also request a guarantor.
3) Limited Selection of Credit Cards
Another drawback of bad credit scores is that they significantly limit your access to credit cards.
With a poor credit score, you may only be able to qualify for secured credit cards or those with limited benefits. You could also qualify for credit cards for bad credit. However, these cards charge high interest rates and you could get trapped in debt.
Additionally, this limited selection also restricts you from building a positive credit history and using your credit card rewards and benefits to your advantage. As a result, this makes short-term lending more challenging and expensive.
However, if you want to demonstrate responsible credit usage, you could begin by using your credit cards regularly. By making small purchases that you can comfortably afford and paying off the balance completely each month, you will be able to show lenders that you can manage credit responsibly.
4) Challenges in Obtaining Car Finance
If you want to buy a car and have a bad credit score, obtaining the finances to make this purchase happen is not going to be easy.
Your bad credit score increases your risk factor as a borrower. As such, out of self-preservation, car finance lenders may charge higher interest rates, demand higher up-front payments or deny your loan application. Consequently, this makes it difficult to finance a reliable vehicle and could negatively affect your job prospects, daily commute, and quality of life.
As a result, having a bad credit score causes many to find themselves stuck financially. Furthermore, with little extra money to spare, the additional expenses associated with bad credit scores make it rather impossible for many to improve their financial situations.
5) Higher Interest Rates on Borrowing
One of the major effects of having a bad credit score is the higher interest rates you will face if you wish to borrow money.
To no surprise, many lenders consider bad credit borrowers as high risk and to compensate for this risk, they will charge higher interest rates. Whether you’re applying for a personal loan, a mortgage or a car loan, these higher interest rates make borrowing more expensive.
However, if you find yourself in a financial emergency and have exhausted all other borrowing options, you could turn to bad credit loans. While not always advisable, the lenders offering these loans use a fairer assessment system and take multiple factors into account rather than from your credit score alone. As a result, your loan has a higher chance of being approved.
Furthermore, by making your loan repayments on time, you could also improve your credit score and work towards a better financial future.
Choose Salad Money For Affordable Low Credit Loans
Having a bad credit score can affect your life and limit your options when it comes to borrowing money. However, if you’re struggling to make ends meet and are in need of emergency funds, Salad Money is here for you.
At Salad Money, we believe that everyone deserves an equal opportunity when applying for a loan. That’s why we use an open-banking-based assessment system to fairly evaluate every applicant.
With our “More Than Your Score” loans, you could access the funds you need to pull through financial emergencies. Applying for one of our new loans doesn’t impact your credit score. We use Open Banking in our initial assessment. If successful, we report your loan to the CRA’s (Credit Reference Agencies). Your credit score won’t hold you back from being eligible.
To learn more about our services, click here and apply for a loan now!
