According to statistics from Experian, one of the major credit bureaus, 16% of Americans suffer from a bad credit score. Bad credit causes serious harm financially, making it tough to get a mortgage, car loans, or the best credit cards. People with a low credit score also receive higher interest rates when they can get credit, making it more expensive to borrow. A bad credit score can cause problems in everyday life, too. Here’s how bad credit can impact your daily life (and what to do about it).
Everyday Things a Bad Credit Score Can Cause Problems With
Here are some of the ways in which bad credit can cause problems in your everyday life.
Renting an Apartment
One of the biggest ways a bad credit score can impact your life is by making it tougher to find an apartment to rent. Renting a home or apartment requires a credit check. This process helps a landlord understand how much of a risk a tenant poses before they approve their application. A bad credit score, including a history of late payments, can keep you from securing a new place to live.
Insurance and Bills
Bad credit also makes it more challenging to pay bills and get insurance. A poor credit score can make utility companies warier of accepting you as a customer. As a result, they may require a deposit before turning on the electricity, gas, or water.
In the same way, insurance companies also look at your credit before giving you a quote. Bad credit correlates directly with higher insurance premiums. This fact is most apparent with auto insurance, as insurers believe those with lower credit scores are more likely to submit a claim.
According to statistics, up to 70% of employers conduct credit checks during the hiring process. Companies conduct these checks to gauge the responsibility levels of potential hires. While bad credit doesn’t mean someone is unreliable, employers may see it as a red flag and choose another candidate instead.
A bad credit score can indirectly cause problems in your personal life. The inability to get a mortgage, rent an apartment, or even find a car loan can cause strife in family and personal relationships. If you are constantly getting calls from bill collectors or collection agencies, this can also cause problems at home.
How to Fix a Bad Credit Score
The good thing about having a bad credit score is that you can fix poor credit with hard work and determination. There are several steps you can take to repair your credit, including:
- Using a credit monitoring service like MyFICO or TransUnion to monitor your score for updates and mistakes.
- Consolidating or refinancing your existing debts to make monthly payments more manageable.
- Only using credit cards for small purchases.
- Paying your credit card balances in full every month.
Using Credit Cards to Repair Your Credit
The last two steps require using credit cards to fix your credit. People with a poor credit score struggle to find credit cards, but there are options available.
Secured credit cards are the easiest option. These cards require a security deposit, making them easy to get. Secured cards are best for building credit: Make a small initial deposit, pay your balance in full each month, and watch your credit score rise.
For more information secured cards, how they work, and their benefits, visit our Secured Credit Cards page and read our helpful guide at the bottom of the page.
If you don’t have the money for a security deposit, there are still unsecured credit cards for bad credit. These cards require no deposit but feature high interest rates, and most have an annual fee. Some of the more popular options include the Indigo Platinum Mastercard, the Milestone Gold, Total Visa, and the Mercury Mastercard.