You may already know that a bad credit score is never good. However, do you know exactly how it affects your life, or rather the precise areas where it causes the most damage? Don’t worry if you don’t know the answer to this question, as in this blog, we will discuss all of it in detail.
The biggest impact of a bad credit score that you will observe in your life is the difficulty in borrowing new loans from banks and NBFCs. This is because a poor score is usually the indicator of poor credit management and a lack of responsibility.
When someone who has a low credit score, or worse- has their name on loan defaulter list approaches a bank for a loan, then the lender finds it nearly impossible to take the risk in offering credit owing to the applicant’s bad track record.
It’s no secret that credit cards make our lives easier. For instance, you can use them to withdraw money when in a cash crunch, buy expensive products (under EMI system) that you otherwise can’t afford, and even save lots of money through cashback offers, reward points, discounts, etc. However, when you have a bad credit rating, then you have to make several compromises with credit cards as well. For instance, you may have to manage with just one credit card even if you need more. Similarly, you won’t be able to increase the credit limit as a higher limit will only increase the risk for the card issuer.
One of the most important things that loan borrowers check in a loan is the interest rate. This is because the higher is the rate, the bigger is the amount they have to pay to the bank. The problem is that when you don’t have a good credit score, then you can’t expect to get some of the best rates in the market. In fact, you will be surprised by the kind of rates that are offered to you when your credit report shows several late payments, high credit utilization ratio, or name on a loan defaulter list, etc.
Since credit report can tell a lot about someone’s personality, more and more companies have started referring to the same when screening candidates for jobs. In fact, India’s largest public sector bank SBI was one of the first to start this trend and now others have joined it too.
Employers check credit reports to authenticate the personal details of a job applicant and also to confirm that they don’t have a poor credit score which is common among those who are irresponsible and spend money without consideration. So, if your score is not up to the mark as well, then you miss out on some of the best jobs in your life even if you have the academic qualification.
It’s often seen that those who have a low credit rating feel unhappy and anxious all the time. This is not hard to understand, however. When your credit report doesn’t look as good as it should be, then you may feel insecure and worry about your financial freedom. You may get anxiety just thinking about how you would manage if you needed a small loan on an urgent basis, say for a medical treatment. So, if you are unable to improve your score over time, then your mental health may suffer.
A bad score can also come in the way of maintaining healthy relationships with friends and family. Of course, your anxiety is one of the main reasons, but other factors can also add up. For instance, if your spouse has a higher score than you, then it can create differences between you and them as unearthed by a study.
As you can see, a bad credit score can hurt your life more than you think. So, take all the possible measures to protect it and help it grow. These include using credit cards wisely, keeping credit utilization ratio low, paying your credit card bills and loan EMIs on time, etc. Remember, if your score is high, then so will be your level of happiness!