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The Resource Center Credit Fraud & Credit Monitoring | article

The Impact of Having a Bad Credit Score

Everyone says you should have a good credit score*, but how much does it really matter? In some cases, it might not!

Let’s say you already have the latest cell phone, a new car, a stable, government job, a low-rate mortgage on a house you own, plenty of cash in the bank and you don’t use credit cards. If that’s your life, then congratulations. A low credit score may not affect you too much, at least not right now. For most of us, however, a good credit score is essential to functioning more easily in the world.

Life Can Be Easier With a Good Credit Score
Take housing for instance. Whether you rent or own your home, a good credit score will help you get the best deal on it. Why? Because a bad score can keep you from getting approved for a rental apartment or a mortgage, which can make moving from one place to another difficult. That’s fine if you don’t want to move, but what if you do want to pick up and go somewhere else — or worse, what if you have to move because of a family, job, or health issue. In those cases, a bad credit score can lead to an uncomfortable housing situation.

If you do manage to move, you can expect there to be expenses, lots of them. With bad credit, any of those expenses you put on credit cards will cost you a premium over the long haul because your credit card interest rates will be high as a reflection of your score. Meanwhile, your low score indicates to financial institutions that you are a riskier bet than people with high scores. And they will make you pay for the risk by giving you a higher interest rate.

Why else should I maintain a good credit score?
Even if you’ve got no plans to move, you still might want to go somewhere. So, let’s say you decide you need a new car. With bad credit, there’s a good chance you will be denied or you might only get approved with a high interest rate on a car loan. And, guess what…↑ most of those “no credit check” car lots charge extremely high interest rates that will make it difficult for you to make your monthly car payments.

Need a few more reasons to keep your credit score looking good?
At home, whether it’s your current one or a new one you’ve just moved into, you need electricity, water, cable, and phone accounts. As unfair as it may sound, a bad credit history means you will likely have to pay security deposits for each account to establish service in your name — even if you’ve always paid your utility bills on time.

You also need a job. Unfortunately, many jobs in law enforcement, financial services, and other industries require you to have a good credit history. High debt amounts, outstanding bills, or previous bankruptcy claims can lead to automatic disqualification. Which, of course, means leads to this: a bad credit score can affect your ability to secure a job. And in an unstable job market with high unemployment rates, employers can be very picky on this point.

But prospective employers aren’t the only ones who will make decisions based on your credit. Insurance companies also check your credit because people with lower credit scores tend to file more claims. As your score increases, your insurance rates improve.

What is the overall impact of a good credit score?
Stability is not a common feature in modern life. Moving, changing jobs, shopping for insurance policies, and buying cars are all part of life. Having a bad credit score can make these parts of life much harder than they need to be, from having minimal impact on you, to making life a bit more difficult, to having an outright devastating outcome. Therefore, checking your credit and making the attempt to avoid the problem as much as you can is simply a better way to go.

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*The scores you receive with Identity Guard® are provided for educational purposes to help you understand your credit. Lenders use many different credit scoring systems, and the scores you receive with Identity Guard are not the same scores used by lenders to evaluate your credit.

Credit scores are provided by CreditXpert based on data from the credit reporting bureaus.

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