The 4 Most Unanswered Questions about Lenders

What Bad Credit Can Do to Your Life

Usually, in the loaning system, lenders depend on credit scores, which is a numerical representation on the credit-worthiness of an individual, which is based on a level analysis of a person’s credit files. A credit score is basically a yardstick measure for borrowers to get a loan, such that financing companies produce a credit score, ranging from 300 to 850 with 850 as the highest score, for a borrower with a Social Security number using data from the person’s previous credit history and lenders use a credit score to evaluate the probability that a person repays his debts. The borrower’s personal finances and his capacity to borrow are affected by credit scores and if you’re not performing well with your credit score, which means you’ve got bad credit, the following effects are bound to impact you.

Hard to borrow money

When your credit score is low, the less likely will you find a willing lender or it will directly affect your likelihood of securing approval for a new loan or a credit application. Even if your score is almost close to the cut off score level, for example your score is 698 and the qualified score is 700, many lenders don’t make loans where the credit score falls below the accepted level.

Confronted with higher rates when you borrow

Money lenders and financing companies are relying a lot on a borrower’s credit scores such that when a borrower’s credit score is a few points way below the qualified score, his chances of borrowing may be slim but if he gets his loan approved, he will be confronted with a higher rate and with additional restrictive terms from the lenders or financing institutions. The interest rate difference can mean an additional of tens of thousands of dollars to the total cost of a mortgage, depending on how the loan is structured, but the same principle applies to auto loans, home improvement loans, personal loans, and credit cards.

Trouble renting an apartment

Credit score rating is subject to the kind of apartment unit that is open for lease, such that if you’re applying to rent an apartment and your credit score is high, landlords can accommodate you to well-kept, modern apartments in a desirable neighborhood, but if your credit score is low, landlords may be lenient to the credit score but will offer you a substandard dwelling unit in an undesirable area and, at the same time, the landlord will most likely require a pre-lease credit check.

Difficulty to find jobs

There is a high probability of employers to check on the credit status of prospective employees during the hiring process, which shows that the credit score level of an applicant can be a contributory factor to his future employment, most especially with positions that need a security clearance. In a handful of states in the US, the practice of a credit status check on an applicant is banned or restricted, but this doesn’t stop employers from doing the checking rounds because ideally an employee can work efficiently if there are no distressing factors, which he/she is carrying, one of which is a bad credit.

Strain on personal relationships

The status of your credit score and your credit overall profile can also affect your personal relationship and family life in a manner when you and your spouse will apply for either a home loan or auto loan, since lenders look at both you and your spouse’s credit profiles and assess your household’s overall credit risk. A higher interest rate or a larger down payment will be required, if one of you falls lower in the credit qualification, and if you fall behind payments, you not only suffer the consequences of a low credit card score, but a strain in your family relationship is also gradually developing as an outcome of stress from being confronted with these financial issues.