Finance Globe

U.S. financial and economic topics from several finance writers.
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What’s the Problem with a Low Credit Score?

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A low credit score (also known as a bad credit score) isn’t the end of the world. Even if you have a low score, it doesn’t necessarily mean you can’t live the life you want in regards to your finances.

However, as time goes by, you’ll come to realize that a low score is impacting you in a variety of ways. Here are five issues that could come to light:

•    Loan denial: Lenders look at many things when making a final decision on your loan application, with a strong focus on your credit score. If they have concerns about your ability or willingness to repay the loan, a denial could be the end result.
•    Higher interest rates: Even if you do get approved for a loan, the lender will protect itself by hitting you with a higher than average interest rate. The higher rate can make it more difficult to complete your transaction, such as when buying a home or motor vehicle.
•    Difficulty securing a credit card: Yes, there are credit cards for consumers with bad credit, but these don’t typically offer the same high level of features as those for people with good credit. Furthermore, and just the same as a loan, your interest rate will be higher.
•    Higher car insurance premiums: Many people don’t know that car insurance companies often take their credit score into consideration when setting their premium. You already have to pay enough for coverage. You don’t want to find that your premium is higher than it has to be because of a bad credit score.
•    Difficulty getting approved for an apartment: If you’re searching for an apartment, don’t be surprised if you’re asked to complete a credit application. It doesn’t always hold true, but bad credit could stop you from getting approved for a lease.

The only good thing about a low credit score is that there are steps you can take to improve it in the weeks and months to come. With the right plan in place, you’ll find your score on the rise. Subsequently, you won’t have to concern yourself with the potential pitfalls detailed above. 

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Comments 2

Frank on Wednesday, 27 February 2019 15:34

Thanks for the info Chris. A low credit score really only hurts you. If you have a low credit score now, make a goal this year to improve it so you can improve your financial situation!

Thanks for the info Chris. A low credit score really only hurts you. If you have a low credit score now, make a goal this year to improve it so you can improve your financial situation!
Wanderer on Monday, 11 March 2019 07:39

One method to help improve credit scores is to keep your credit utilization under 30% and some schools of thought even take it to 6% and 1% with one credit card reporting a balance. Another big help is go to the garden for six months plus and let your credit take a rest. Lack of credit seeking can aid your scores due to allowing your "oldest account" and "average age of accounts" to get older. You would be amazed at how well this works. Remember a FICO Score of 720 will generally get you the products you seek and with good terms. Many people have credit scores in the 600's and you may get approved but with lower credit limits and higher Aprs. Mortgages can often be attained with scores at 620 but again, the higher the score the better the interest rate and if you are looking out over 30 years this can be big money saved! All food for thought!

One method to help improve credit scores is to keep your credit utilization under 30% and some schools of thought even take it to 6% and 1% with one credit card reporting a balance. Another big help is go to the garden for six months plus and let your credit take a rest. Lack of credit seeking can aid your scores due to allowing your "oldest account" and "average age of accounts" to get older. You would be amazed at how well this works. Remember a FICO Score of 720 will generally get you the products you seek and with good terms. Many people have credit scores in the 600's and you may get approved but with lower credit limits and higher Aprs. Mortgages can often be attained with scores at 620 but again, the higher the score the better the interest rate and if you are looking out over 30 years this can be big money saved! All food for thought!
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Wednesday, 16 October 2019

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