7 Ways Bad Credit Holds You Back

Having poor or no credit may not seem like a big deal to some people, but your credit standing impacts more areas of your life than you may think. There’s the obvious concept — bad credit means you’ll likely have trouble getting credit — but your credit standing can make life much more expensive than it needs to be.

Here are seven examples of ways bad credit (or no credit) can affect you.

1. Higher Interest Rates

People with the best credit scores receive the lowest interest rates on auto, home and personal loans (in addition to credit cards). If saving money is important to you, work to improve your credit before taking out a loan, so you can pay as little in the long run as possible.

2. Pricier Insurance

Every insurance company and state is different, but insurance underwriters often take into consideration your credit standing when determining your rates. In some states, poor credit can result in double the car insurance rates of someone who has the same driver profile and excellent credit. See how credit standing affects auto insurance rates in your state by checking this list.

3. A Tough Road to Getting a Loan

This is the obvious one, but it’s incredibly important: You want good credit when applying for loans. If your goals include owning a home, owning a car or making a large purchase, and you don’t have the cash to do it, you’ll need to apply for financing. Before you can worry about what your interest rate on that loan will be, you actually have to get the loan.

Credit access goes beyond loans, too: Many Americans choose to use credit cards, either for convenience or for the perks they offer, but if you have poor credit, your card options will be limited. To qualify for the best credit card options, you want excellent credit. (What is a “good” credit score? Find out here.)

4. More Difficulty in Home & Apartment Hunting

Credit matters for renting, not just owning, a home. It’s pretty simple: Landlords want reliable tenants who will pay rent on time, and even if their standards aren’t high, you don’t want to close any doors purely because your credit isn’t in good shape.

Rental applications often ask if you have any collection accounts or other negative items on your credit report — they also tend to require a credit check. Sometimes, you have to move house quickly, either because the rental market is competitive where you live or a life change requires you to relocate, so you don’t want to be hindered by poor credit while you’re looking for your new home.

5. Trouble Getting a Job

With your consent, potential employers can review your credit reports when considering you for some jobs. They cannot look at your credit scores, and there’s a lot of debate over whether credit standing is at all relevant to a job candidate’s qualifications, but you still want to review your credit reports when job hunting.

6. Higher Utility Costs

Like landlords, service companies want to know they’ll get your bill payment when it comes due. If you have no or bad credit, utility companies may request you pay a large deposit upfront, so they’re covered if you stop paying. Given how much it costs to move, you’ll want to reduce your startup expenses as much as possible. Not only do you want good credit when applying for an apartment, you’ll want it when setting up the electricity, water, Internet and cable in your new place.

7. Relationship Struggles

People value financial responsibility in their significant others, and studies show money arguments are predictive of divorce. Your boyfriend may have been working for years to reach his level of monetary and credit security, and if you come into the relationship with buckets of debt and terrible credit, you may freak him out a bit (true story). Don’t let credit problems become a liability in your personal life.

This isn’t to say bad credit is catastrophic. People bounce back from crippling debt and bankruptcy every day, but you can’t hope to improve if you don’t see where you stand. Check your credit reports and credit scores (you can get two scores for free every month through Credit.com), see where your problems lie, and make a plan to fix them. Got high debt levels? Try reducing your spending or increasing your available credit. Dealing with debt collectors? Be proactive and see if you can settle for less than you owe. Have trouble making payments on time? Explore automatic bill-pay options and keep a detailed schedule of when everything is due. Budgeting is a huge help, and if you spend responsibly in addition to monitoring your credit, you’re likely to succeed in boosting your credit score as long as you maintain good habits.