There are a lot of people who have bad credit. This is something that one has to be wary of. If you earn so much money that you do not have need to borrow, then you will not need to worry about bad credit, but if you do not earn a lot of money and need to borrow once in a whole to overcome financial troubles, then you need to know all about bad credit and its effects.
What is bad credit: The credit that is provided to you may not have been repaid by you on time and this is called as bad credit. For example, when you use a credit card and have not repaid the outstanding amount to the credit card issuing company, then you be said to have bad credit.
There are several effects of the bad credit that you need to know about too. Some of the effects are listed here.
- Inability to get more loans: You will not be able to get more loans if you have a bad credit. The lending agency will look at your credit score and also your credit history. When there has been a lot of defaults on payments and because you have a poor credit score and bad credit history, the lender will not provide loans to you. It is a well known fact that most of the people who have a poor credit score and also obtain new loans will default on these loans too. So, to minimize this risk, the lender will completely avoid giving out loans to you.
- Inability to get credit cards: If you have a bad credit history, then you may not even be able to obtain a credit card in your name. The credit card issuing company will be wary of a person with poor credit. This is because of the facts that once the card is issued, you may overshoot your credit limits and then avoid paying back the money. So, people who have poor credit history and poor credit scores will not be provided with credit cards.
- Inability to get a proper home for rent: A person who is having a bad credit will not be able to get a house for rent. This is because house owners or landlords who are giving out the homes for rent will check your credit score before providing the home. If they find that your credit report tells of bad credit, then they will not risk giving their homes to you on rent because they will be scared of not getting the rent paid on time.
- High interest rates will be charged on loans you get: The other effect of the bad credit is that you may not get a loan. Even if you do get a loan, then you will be charged a higher interest rate on the loan.
So, it is always better to have a good credit score so that you will not have to suffer all these effects that have been listed here.