Getting a credit card can feel like getting access to free money, but it’s important to remember that anything you spend has to be paid back. If you’re unable to meet your repayments, you’ll ruin your credit score, which can have a major impact on your life.
A poor credit score can significantly impact everything from loans to insurance, even delaying certain life milestones.
So, before you go on a spending spree, make sure you know the impact a poor credit score can have on your financial life.
Increased Cost of Borrowing
If you have a poor credit score, banks can consider you a risky individual. That means next time you need to borrow money, you’ll face higher interest rates and other fees. In other words, borrowing money will become even more expensive, making it even harder to pay back.
Of course, you can still get credit cards for bad credit. These cards are designed to weigh up your risk and potential repayment, so you must provide complete and accurate information when you apply.
Challenges in Securing Housing
A poor credit score can also make it harder to get a mortgage. Just like with getting a regular loan or credit card, the banks can identify you as a risky investment. This can mean that you only have access to more limited mortgage amounts, or you have to have a much higher deposit in order to get the amount you need.
In either scenario, having a poor credit score makes it a lot more difficult to actually secure housing.
Difficulty Accessing Essential Services
When you have a poor credit history, you may also find that you lose access to various essential services. Mobile phone providers, for example, will run credit checks to make sure you are a suitable candidate for their contract. If they think you won’t be able to pay the monthly balance, then they might refuse to sell you the phone.
Utility companies, like those offering gas and electricity, also carry out credit checks on their customers. If yours comes back with a poor result, then this can affect how much you get charged each month, or even require a deposit before you become a customer.
In some cases, utility companies can also request that you have a guarantor ready to take over your payments.
Companies do this to ensure that you can pay for their services, and to mitigate the risk of taking customers who can’t afford to pay them.
Delayed Life Milestones
With all this in mind, it’s no wonder that a poor credit score can delay your life milestones. In fact, many Britons have postponed major milestones, like buying a home, career changes, and marriage, due to credit score concerns.
By not being financially stable, people are understandably feeling unprepared to make a major financial decision in their lives.
