You know you should improve your credit score. You hear over and over again that having bad credit can affect your interest rates on credit cards and loans, but if you think those are the only things bad credit affects, think again.
10 Things You Didn’t Know Bad Credit Affects
1. Your Mental Health
Did you know that psychological and social epidemiological research has linked household debt to higher instances of depression, greater feelings of stress, lower quality health, and higher blood pressure? This may sound obvious, but the connection between debt, bad credit, and poor mental health is oftentimes ignored in favor of pretending the problem will magically go away on its own.
Having high levels of debt and a bad credit score can hurt individuals’ self-esteem, lead to more drinking and drug use, and even exacerbate mental health problems, as Psychology Today reports.
Don’t let debt control your life and ruin your credit score. By paying off your debts efficiently and living below your means, you’ll be much more likely to enjoy peace of mind and a lower likelihood of developing mental health issues like money-related stress.
2. Homeowners’ Insurance Policies
Want to save money on homeowners’ insurance? Having a bad credit score won’t help with that because folks with bad credit pay much more for different types of insurance, especially when it involves expensive properties like homes or apartments.
In fact, a 2014 survey found that people with bad credit pay an average of 91% more for homeowners’ insurance than people with excellent credit! Meanwhile, folks with average credit pay about 29% more for homeowners’ insurance.
Since homeownership is already expensive enough, you can seriously trim your household expenses by improving your credit score as soon as possible and getting a new quote on homeowners’ insurance policies.
3. Auto Insurance Policies
As with homeowners’ insurance, auto insurance costs a lot more for drivers with poor credit. How much more? Some reports say drivers with poor credit may pay as much as $2,000 more than drivers with good or excellent credit. Yikes!
This is even worse than being held responsible for a car accident, which typically increases a person’s auto insurance by just $446 or so.
Fortunately, there are many things you can do to improve your credit score to get better auto insurance rates, while it might take several years for that accident to gradually disappear from your auto insurance records.
4. Access to Payment Plans for Electronic Devices
Want to buy a new iPhone or Android phone? What about a new television or computer? Unless you have a well-funded emergency fund to cover a broken or lost smartphone, laptop or other electronic device, then trying to get access to payment plans for electronic devices with bad credit may be next to impossible.
Some companies will flat-out reject any consumer trying to secure a payment plan for a device with less than excellent or good credit, while other companies will charge a hefty interest rate to get access to installment payments, as opposed to paying for the whole item upfront.
Since you obviously don’t want to add more debt to your collection if you’re already struggling with bad credit, your best option is to wait until you can afford it or work on your credit score to ensure you can get access to payment plans in the future.
5. Your Apartment selection
Living with poor credit as a tenant can be a nightmare sometimes. If you need to move, you may face several rejections from landlords who require a minimum credit score to qualify for the unit.
If you happen to be accepted, you might have to put down the equivalent of the first and last month’s rent as a security deposit, which is financially difficult for many people to handle. Additionally, you may only find month-to-month leasing options, which leaves you in a potentially volatile living situation because your landlord can charge a higher rent next month or even ask you to move without the guarantee of an annual lease contract.
6. Mortgage Refinancing Opportunities
If you’re dealing with a high interest rate on your mortgage loan and want to refinance your home, opportunities may be limited if your credit is fair or poor. Since credit scores presumably reflect how responsible a borrower has been with money in the past, mortgage lenders are largely unwilling to refinance loans for borrowers with less than stellar credit.
This means you may end up paying thousands of dollars more in interest over the course of your 15-30 year mortgage loan than a borrower who had a good or excellent credit score.
7. Access to Utilities
Did you know that some places allow utility companies to shut off the water, gas and electricity if you have poor credit and fail to make timely payments? If you have a poor credit score before signing up for utilities, you might have to pay a sizable security deposit to your utility company as a guarantee that you’ll pay your bills on time and in full each month.
It’s a huge hassle for anyone to deal with, so work on avoiding the issue altogether by improving your credit score and never missing a bill payment on your utilities.
8. Your Romantic Life
Who would’ve imagined that poor credit can affect your love life? Unfortunately it’s true, as finances are the number one cause of conflict in romantic relationships, and the stress of planning your financial situation as a person with excellent credit who’s dating or married to someone with bad credit can be a major deal-breaker for some relationships.
If your partner doesn’t view you as someone who will help them build a stable financial future together, then your relationship may be on the rocks until you get onto more solid financial footing.
9. Ability to Get a Job in the Military
Before enlisting in the U.S. military, you’ll have to go through a personal credit check. If you have too much debt or a poor history of financial responsibility, then this may prevent you from securing a job in the Armed Forces.
10. Professional Licenses
In some cases, you may be at risk for losing your professional license if your credit is poor. For instance, if you don’t pay your student loans on time, there are 22 states that will revoke your professional license as a result of this presumed financial irresponsibility on your part.
Improve Your Credit Now
Since bad credit scores affect so much more than just the interest rates you’ll pay on loans and credit cards, it’s important to do whatever it takes to keep your credit in good condition.
Everything can be impacted by having poor credit such as your job prospects, love life, living situation and even your mental and physical health. Rather than waiting for the problem to resolve itself, take active steps to improving your finances before it becomes a serious issue.