If you know people with bad credit, you may believe that having a low credit score doesn’t matter. They may have a home or a car and appear to be in good financial standing. Whether or not you believe credit ratings are important, they can have serious repercussions. The annual percentage rate, or APR, is the most significant factor to consider if you have a poor credit score.
Buying a House
You can get a mortgage even if you have less than perfect credit. You may not be able to qualify for a mortgage loan if your credit score is below 620. However, this doesn’t guarantee that you will get the best deal.
While you might be able to get your foot in front of the door, you will also face a higher interest. The monthly cost of your mortgage will be higher than the rate. If your income is low enough to qualify for a loan amount, this is not the best news.
The lender may add interest to the equation and decide that the mortgage payment is not too high for you. Bad credit is simply a higher rate of interest, which can harm your purchasing power. You can still buy a house with poor credit, but it will cost you more, and you may not get the home you want.
Apartment renting
For those who are unable to get a mortgage loan, renting is a viable alternative. It is becoming increasingly difficult to rent with a low credit score due to the tightening credit requirements of private landlords and management firms. Bad credit applicants might be shocked to learn that applying for apartments is easy if they have a steady income and a track record of renting.
Many landlords conduct credit checks on potential tenants. Although credit is not always the deciding factor in a rental agreement, low credit scores can lead to landlords making the wrong decision.
Some landlords will accept a larger deposit, but that all depends on the landlord’s willingness to take the risk. Low-score applicants may have more luck with a cosigner who will guarantee rent payments.
Other types of loans
A variety of loans will not be available to you if you have a low credit score, except for federal student loans that don’t require a high credit score. Lenders won’t take chances on someone who is late or skips payments. They can’t be blamed.
Banks take the risk of a loan, so there’s always the chance that the applicant will not pay. The risk is not as great if a potential borrower has excellent credit and pays all bills on time.
You don’t have to have a poor credit score to get a loan. You might need to contact several lenders before you can find the right loan. Also, the terms of the loan offer you get may not be the best. A person with excellent credit could pay twice the amount you would.
Contracting for a cell phone
Some people cannot walk into Sprint and Verizon and get a contract for a cell phone. Cell phone providers, like banks, must minimize risk. This is why they conduct credit checks on potential customers. They don’t want customers who keep racking up high phone bills and not paying their bills.
You have very little chance of being approved for a traditional phone contract if you have bad credit. If you can get an agreement, the provider might ask for a deposit. This can vary depending on which company you work for and your credit score.
All hope is not lost. There’s always an option to pay-as-you-go for your cell phone plan. However, a contract is not required to purchase phones at subsidized rates. This could lead to iPhones costing upwards of $650.
Married life
If you are a good credit person and your future spouse is bad credit, it might be worth setting some ground rules.
The person was responsible for any debts you have accumulated before marriage is not their responsibility. However, they might not be liable for any debt you accumulated before marriage. Your bad credit habits could harm your financial future.
You may decide, like most couples, to purchase a house or car. Don’t expect lenders or mortgage brokers to approve you if one of your credit scores is higher than the other. Instead, they will take the average of both scores. If you have a credit score of 800 and 500, this is a median score of 650 the most important thing is the annual percentage rate or APR. This is not high enough to qualify for prime rate.
Leave a Reply