The Cost Of Bad Credit

Whether you are someone who is starting to worry about your credit score or someone who hasn’t thought much about credit scores in the past and is curious about why people tend to worry so much about it, you may want to know what the actual consequences of having a low credit score are.

If your credit score is considered low (generally below 500 or in some cases 600), you could face issues when trying to take out a loan or apply for credit. Having a low credit score suggests to lenders and creditors that you are too risky to lend to. This could be because your credit report tells them that you have had issues in the past with gaining credit or making repayments. It could also be a case of having a short credit history where there is no past examples for them to refer to and they don’t want to risk being the first to lend to you.

If you do manage to get accepted for credit with a low credit score, you may be faced with higher interest rates and fees to balance the risk of lending to you. Always check the interest rate you specifically are being offered, as this may differ from the company’s usual rates if your credit score is lower than their usual requirements.

Even if you are not taking out a loan or credit, having a low credit score can effect purchases you wish to make. For example, if you want to enter a financial agreement that goes beyond a single and final fee, such as leasing a car or acquiring a new phone contract, the retailer will likely do a credit check first to see how likely you are to pay your bills on time. If your credit score is too low, this could indicate a red flag for them which stops you from being able to purchase what you wanted to.

If you feel like your credit score is low, don’t panic, there are ways to improve this! Although there are no magical ways to immediately boost your score, there are a few things you can do to improve your credit score over time.

Has our credit score series has made you curious to know more about your credit score?
You can access a detailed copy of your own credit report through CheckMyFile.*

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