Where Bad Credit
Hurts the Most
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Bad Credit Blues
Most people understand that low credit scores will translate into higher mortgage and credit card interest rates. But few realize there are plenty of other insidious ways that a low score can add to a person's costs. Bad credit can also negatively affect your job, utilities, cell phone, elective medical procedures and your marriage.
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Car Insurance
Consumers with bad credit pay between 20 percent and 50 percent more in auto insurance premiums than their good-credit neighbors, says Clarence Smith, who authored an insurance study for Conning.
"It's profiling," says Trish Lynch, a financial specialist with ClearPoint Financial Solutions in Richmond, Va. "Think about it: If you have all these credit issues, a lot of times your mind is not exactly where it should be, like when you're driving."
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Car Loans
People with poor credit usually pay an interest rate between 19 percent and 26 percent on a new car purchase, compared with the six percent to seven percent average, says Lynch.
"People don't equate that into dollars and cents," she says. "That can be a difference of $100 to $200 a month on your car payment. It hits the pocketbook kinda heavy."
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Job
Today, 70 percent of companies will check credit before they decide to hire a candidate, says Doug Borkowski, a financial counselor for Iowa State University's Financial Counseling Clinic. The fear is that credit problems at home create tension and distraction at work, Lynch says.
"If you are their employee, will you be getting phone calls from collectors at work? Will the employer have to garnish your wages?" she asks.
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Housing
Rental property owners may reject tenant applications with poor credit scores, something only 48 percent of consumers know, according to a CFA (Chartered Financial Analyst) survey.
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Utilities
Only 30 percent of the Americans that CFA surveyed know that utilities, too, care about credit scores. Even slow credit indications are enough to slap you with a $500 deposit before the telephone company connects your line or the electric company turns on the juice, Lynch says.
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Cell Phones
These providers increasingly rely on credit scores to sort the good risks from the bad credit. Bad credit definitely doesn't get the sweetest deals at Verizon. Instead of contract plans that offer more minutes for your dollar and come with a wider selection of phones, those who do not make the cut must consider pay-as-you-go phones.
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Elective Medical Procedures
When Lynch looked into laser eye surgery, the doctor immediately pulled her credit score to see if she qualified for his monthly payment plan. Otherwise, the bill is due in full at the counter.
"They're not denying you service, and if it were a mandatory treatment, this would never come up," she says.
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School Loans
Lynch, has watched families' dreams burst when their scores disqualified them from university and federally funded loans. In this case, it isn't a matter of sucking it up and paying a higher interest rate.
"It's black and white. You get financing or you don't," she says. "Not furthering your education is a far-reaching consequence."
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Marriage
You can't marry your way out of a bad FICO rating, and a disparity between partners can put too much stress on the marriage, says Brette McWhorter Sember, author of "The Complete Credit Repair Kit." She knows couples who skipped walking down the aisle over it.
"If the owner-spouse dies, the home and mortgage become part of the estate. If the surviving spouse wants to take over the mortgage, he or she needs to qualify for credit," says Sember.
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Recent Comments
Jetmch 01:49:48 AM Jul 12 2008
Banks arn't the only ones that are charging usurious Interest rates, I applied for a loan a while back where the Interest rate on a $2500.00 dollar loan was at 98.5%. I could have got a better rate from the local loan shark. And it doesn't matter who you vote for, the credit card companies, and the central bank own and run the goverment. the central bank has the most to lose, credit is why it was formed, the more that is owed, the more they make.
Ruffie621 01:39:29 AM Jul 12 2008
If all you people think the credit card companies are so bad, then why do you use the credit card. I agree the credit card companies are out of control and that's why I stopped using them. A credit card should only be used for an emergency or the convience of ordering something on-line or by phone. The bill should be paid in full when it's received. That way there is no interest charge. Using plastic money to make purchases you want but don't need is only going to get you in financial trouble.
Rhymon2000 11:33:45 PM Jul 11 2008
Heres my question. If well off people pay lower rates and poorer people pay a higher rate is that not just another way of making the rich richer and the poor poorer??? If the poorer people payed the same 6-7 percent interest they would be able to make payments easier!!!
Resres12 10:30:27 PM Jul 11 2008
If you ever try to take coustody of a child which is not your own, you will discover one of the first things they will ask you is about your income and your credit. STATE of IOWA
Resres12 10:27:54 PM Jul 11 2008
A persons ability to work, drive or raise thier grandchild should not be based on their credit score. And that comes from someone with a good credit score.
Barcusgab 09:33:41 PM Jul 11 2008
Banks are charging usurious interest rates, a crime, then tagging people with so called bad credit scores. The credit card companies were all sponsors of the GOP Conventions in 2000 and 2004, and their reward was to be able to commit usury nation wide. If you want change, voting Republican will not result in change. The National Bank Act needs to be amended to stop the "exportation" of usurious interest rates from usury havens like South Dakota, Delaware and Utah to the rest of the nation. Under no circumstances should credit card interest rates ever exceed 18% simple for anyone. While I am on a roll, the Bankruptcy Act needs to be amended to shed all unsecured debt, as it has been since in the Judeo-Christian world for almost 6,000 years. In the bible, a "jubilee year" was a year when all debts were cancelled. Surely we can return to the law where our most destitute citizens get a fresh start after a debt shedding bankruptcy.
MDan587 08:40:18 PM Jul 11 2008
I honest to God don't believe that the many national Democrats are principled enough to persevere through these economical and global issues in the world today. I think they are to busy trying to make the republicans look worse than they are than on the true PRINCIPLE strategies that the nationa need in order to heal the world. THEY ARE A BUNCH OF MEDIA DRIVEN HYPOCRITES. They are a bunch a media driven hypocrites.
MDan587 08:34:59 PM Jul 11 2008
Credit and marriage: You never know wehre a person is in their life; bad credit today, a multibillion book seller tomorrow. Credit score or the knowledge to correct the errors that led to it can be corrected with diligence and knowledge. Don't miss your soul mate because of a credit score that's so superficial.
MDan587 08:32:17 PM Jul 11 2008
One thing is for sure its imortant to save and resist temptation if you can afford a job? Afford a job, I think that that unfair that your credit can determine your job hiring situation. How can a person correct their mistakes if they can't get a job to pay off their credit errors?
| Type | Current | APR |
|---|---|---|
| 30 Yr Fixed Mtg | 5.16% | 5.39% |
| 5/1 ARM | 4.32% | 4.24% |
| $30K HELOC | 5.82% | 0.00% |
| 36 Month New Car Loan | 7.20% | 0.00% |
| 1 Yr CD | 1.59% | 1.60% |
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