Risk of Having Bad Credit

There are a number of risk associated with bad credit. When you have a good credit score,
you have access to the best credit cards, loan products and lower interest rates. When you
have a bad credit rating, you will miss these days, paying more or being declined on
applications.
Bad credit makes life difficult in numerous ways, it delays retirement and costs you money
in the long run. Improving your credit rating is possible, you need a good understanding on
the risks of bad credit.

Risk to Lenders

One of the risks of bad credit is that you are a risk to lenders. Banks do strict credit checks
and affordability checks to ensure that you are able to repay the loan in a timely manner.
With bad credit you may not qualify for personal loans, short term loans or credit cards.
You may be limited or not eligible at all if you have a bad credit rating for some financial
products, as a result, you may only be eligible for payday loans, loans from title companies
and pawn shops, all come with increased risks.

Loans Will Cost More

When you have a good credit rating, you can apply for a loan with confidence, securing the
best interest rates, as you are considered low risk. When you have a bad credit rating,
while you may be approved, you can expect to pay a significantly higher interest rate,
costing you more over time.

A personal loan, short term loan or car finance will come with
higher interest rates, which means the final amount payable is much higher than if you had
a good credit rating from the start. This is why you need to be aware of the interest rates
offered and ensure you are able to make timely repayments on any loan you apply for.

Insurance Premiums

What you may not be aware of is that if you want to pay your insurance on your car or
home in instalments, the insurance company will do a credit check first. When you have a
bad credit rating, chances are you will need to pay your insurance in one lump sum, rather
than spreading the cost over a year period. This can be a strain on your cash flow,
especially if you have other debt you are busy repaying.

Career Opportunities

Certain industries will do a credit check on a potential employee before offering them
employment, especially when it comes to the role working with finances. You cannot work
in a bank or manage a business accounts if you cannot manage your own money. As a
result you may find yourself limited to career opportunities if you have a bad credit score.
Your credit score reflects any non paid debts, late payments and CCJ’s. If you want to
push ahead in your career, improving your credit score can help you achieve your career
goals.

Renting a Home Can Be Difficult

Most landlords and rental agencies these days require a credit check to ensure you will
pay your rent on time. Some rental agencies are stricter than others. A bad credit rating

can result in you being turned down for your dream home rental. It’s not uncommon for an
increase in deposit or having someone co-sign the lease with you in order to be approved.
Bad credit can make renting a home harder.

You May Not Be Able to Get a Credit Card

Credit card rewards are offered to customers with excellent credit scores. You get the best
offers and cash back incentives. One of the risks of bad credit is not being able to secure a
credit card or securing a credit card with high interest rates, which means your monthly
instalments are considerably higher to repay any of the money used.