| Why Rebuild Bad Credit |
| By Credit Federal |
Published
01/16/2009
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Credit Report
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Why Rebuild Bad Credit Even If You Don't Care About Your Credit Score
A lot of consumers; struggling just to pay bills for basic living expenses, are getting the attitude that they don't care if they have a bad credit score. But ignoring the low score can make basic living even more costly. Even if you plan to no longer use any type of credit (you're not going to apply for an auto loan, a credit card nor a mortgage), your cost of living can increase due to bad credit.
Many businesses now gauge your trustworthiness based on your credit score, so having bad credit can make life extremely difficult, including getting a job or a place to live.
Here are reasons why you should rebuild bad credit, even if you don't plan to ever use credit again:
- Difficulty getting approved for an apartment, or having to pay a high security deposit or pre-paid rent. To sniff out bad tenants, many landlords now rely on credit reports to reduce their risks.
- Having to pay utility security deposits. Electric, phone, and cable companies routinely check credit reports as part of the application reveiw. Even if you had always paid your electric bill in full and on time every month at your previous address, you may still have to fork over a security deposit if you have a bad credit report.
- Inability to get a cellular phone. Since cell phone carriers are extending a month-to-month service, they need to know how reliable your payments will be. With a bad credit report, you may have to settle for a prepaid cell phone.
- Being denied employment or promotion. The best paying jobs typically require personnel who are trustworthy in managing their own personal finances, especially jobs that deal with money, investing, or company trade secrets. People with high debts, bankruptcy, problems making monthly payments on time, etc, are viewed as a potential high risk.
- Paying higher insurance rates. Insurance companies check credit reports, because statistics show that lower credit scores are linked to higher claims filed. Higher risk people have to pay higher insurance rates, simple as that, even bad credit people who'd never yet filed a claim.
And here's how a bad credit score can make existing; or future credit, costly or difficult to get approval:
- Higher interest rates on your current credit cards and loans. Again, bad credit people are viewed as a high risk. Even if your bad credit was due to issues other than; for example, making credit card payments, your credit card issuer will likely raise your interest rate and/or lower your max credit limit. Even a late payment to your phone company can result in your credit card issuer raising your rate or lowering your charge limit. Creditors make you pay for the risk they are taking by extending a line of credit to you. The result? You pay more in interest and/or fees than if you had good credit.
- Credit and loan applications may simply be denied. Because of your high risk, creditors may not want to lend to you at all, and they have the right to deny you.
- Calls from debt collectors. If you have bad credit, it's likely because of past due bills.
- Difficulty refinancing your car or mortgage. Even if you have a car or home paid in full, you might not be able to use the equity to get a loan. If you are able to get an equity loan, it's likely going to cost you a very high interest rate with a low loan value.
- Difficulty launching your own business. New businesses typically need loans to fund at least part of the startup costs. A bad credit history can limit the amount you’re able to borrow to start a new business, even if you have the greatest idea and the data to prove it.
Get more free tips on how to improve and rebuild bad credit.
Want a second chance to prove credit worthiness? Apply for a credit card to rebuild credit, or for a high risk, no credit check personal loan.
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