Worst Effects of Bad Credit

Although you may not realize it, the health of your credit history will determine whether or not you are suitable for all sorts of things, including fundamentals like being able to secure a property or securing a job. If you have a lot of debt, and have poor records with paying your credit cards these will both contribute to a bad credit score. Bad credit means that you are much more likely to be turned down for loans, mortgages and other credit, such as purchasing an automobile. If you do not try to repair your credit, the "bad" aspects of your rating will show up for 7 years. In some circumstances the bad credit can stay on for 10 years.

Small Businesses

If you ever decide you want to start your own business, you will almost certainly need access to credit to assist with setting up or to fall back on in the event of cash flow difficulties. Having bad credit will mean that you won't be able to obtain this facility.

High Interest Rates

If you do manage to secure credit for a credit card, or in order to make a purchase, this very will be at a much higher interest rate than normal because lenders will view you as a riskier debtor than those with healthier credit scores. For example, there are some automobile sellers that will sell you a car without requiring a credit check. However, the high interest rate can mean that the monthly repayments are difficult to meet.

Utilities

Bad credit will even affect the provision of utilities such as phone, cable and electricity because your credit is checked when you sign up for these as well. Those with bad credit can often be required to pay a deposit by way of security, in the event that they default on a bill. Bad credit also means you are very unlikely to be able to get a cell phone on a contract and will need to prepay, if you can get one at all. Not only that, landlords also conduct credit checks before renting property to you- which at worst could mean that your bad credit could wind up making you homeless!

Collections

Perhaps one of the most stressful effects of living with bad credit is that, once you have defaulted several times, lenders seek to recover their debt by sending debt collectors to your home. Money problems create pressure within marriages and other relationships, adding to the financial problems.

However the good news is that, no matter how bad your credit situation is, you can always start to repair it. It's important to do this as soon as possible, even if you are intending to file bankruptcy, because bankruptcy is not a substitute for repair. Remember, your bad credit didn't happen overnight, and neither is there any quick fix – but with time, effort and perseverance, you'll see a real difference.

If you're in financial difficulties, talk to a bankruptcy lawyer who will be able to advise you on your options given your particular circumstances.

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