There are many reasons why you could have a bad credit score, and many of those happen fast. Unfortunately, there is no fast fix for a low credit score. While you’re working to repair your credit, you have to learn how to live with it.
Here are five areas where you can expect trouble:
- Buying a Home
If your credit score is below 620, you won't qualify for a home loan at all. With a score above 620 but still in the range of poor to fair, you may be able to qualify for a mortgage. Chances are that if you do qualify with bad credit, you’re not going to get the best deal. Your bad credit score will mean you pay a higher interest rate, which means a higher monthly payment. You may find that you can't qualify for the home you want at all, even with the higher interest rate. If you do qualify to buy a home, you'll pay more than if your credit was in good shape.
- Getting a Student Loan
Guaranteed federal loans do not require a credit check and do not penalize applicants for poor credit. Private lenders do check credit and you may find that they are reluctant to make a loan to a borrower with a bad credit score. You may be able to find a loan with a higher interest rate than if you had good credit. You may also be able to be approved for a loan or negotiate better terms with a co-signer who has a good credit score
- Renting an Apartment
Whether you decide to rent because you want to or because you can't qualify for a mortgage, you may find it difficult to qualify for an apartment. Management companies and even private landlords are becoming stricter with their credit requirements. Credit rating is usually not the deciding factor but can make a difference in many cases. You may be able to persuade the landlord or management company by offering a larger deposit or presenting a cosigner. Some landlords will accept one or both of these measures while some will not.
- Cell Phone Contracts
Cell phone providers check prospective customers' credit to avoid offering service to someone who will run up a large bill and not pay it or purchase a subsidized phone and not fulfill the contract. With a bad credit score, your best options are to put down a large deposit with the cell phone provider or use a pay-as-you-go cell phone to build history.
- Job Search
Employees do not check applicants' credit scores but many do run a credit report. A prospective employer needs your permission to run a credit report, but refusing is likely to result in your not getting the position. Agreeing may have the same result. Employers checking credit reports may seem unfair and unreasonable. The fact, however, is that many employers do check and you are more likely to have your credit checked if you're applying for a financial position. If you are applying for a job and the employer asks to check your credit the best thing you can do is agree and ask to explain any negative information.
Bad credit can affect areas of your life that you never expected, but in most cases there is a way around the credit problem. Once you know when you can expect trouble, you can start working on your game plan!