How Expensive Is Bad Credit?

Many people don’t begin to truly care about their credit until it’s too late. By then their scores are low and they’re finding that life is not too easy when you’ve got bad credit. With a bad credit score you may find that life is more expensive – even for services you thought had nothing to do with credit scores. Here are some ways that having bad credit can affect you.

Cars

Having bad credit means that you’ll either not qualify for a loan or you’ll get a a loan with unfavorable terms. This translates into a monthly payment that is $50 to $100 higher than someone with good credit. Auto loan companies are known for trying to do whatever it takes to make a deal. But when you have bad credit, it’s going to cost you. Expect to walk out of the car lot with a lot more than just a car. You’ll leave with a 60 month loan at a high interest rate.

House

Those with bad credit will rarely even qualify for a home loan. Those with bad credit can expect a life of renting if they don’t get their act together or save up enough money to buy a house. This is dangerous since you’ll still be paying rent well after retirement. If you do end up with a home loan, your payments will be higher by hundreds of dollars. This can translate into paying over $100,000 more in interest over the life of the loan. Those with bad credit are often lured into dangerous adjustable rate or interest-only loans. These offer low payments to start, but higher payments later.

Credit cards

When your credit takes a hit you can expect your credit card interest rate to increase. This means that even if you’ve been making your monthly payment on time to pay down your card, your payment will go up since the interest rate has gone up. Those with bad credit will also find it difficult to qualify for a credit card. The only options for them might be credit cards with a low credit limit, high interest rate and monthly/yearly fees.

Car insurance

Auto insurance companies use a wide variety of factors when deciding how to price your premium. This can be everything from driving record, where you live, what type of car you drive and yes, your credit score.

Cell phones

You might find that you can’t add more phones to your line if you have bad credit. This is costly since those with good credit can open additional lines for relatives at just $10/mo. Those with bad credit are out of luck. Their relative will have to get their own line at $40/mo.