If you have a past failure, it will prevent new credit from being approved, leaving you helpless. This is known as bad credit. It indicates that there are credit obligations which you have not paid for, on time, in the past and that will leave a black spot on your credit. A credit report is compiled based on your credit account history and this is reviewed when you ask for new credit. If you have too many negative information on your credit report, it will reflect as bad credit and banks will hesitate to give you credit. It may be due do vehicle repossession, bankruptcy, high balances and accounts sent to collection agency. However, bad credit generally occurs only if such things happen more than once.
- Employment Denied: If you have bad credit score, employers will not trust you. Especially when you are trying to get a new job, a history of good credit will be a must, especially in finance industry and upper management. It is possible that you are denied of being appointed at a company because of your credit report that states outstanding bills, bankruptcy and high debt amount.
- High insurance premium: According to insurance companies, if a person has bad credit, the chances of them claiming the insurance will also be high. Hence they make it a point to check your credit and charge you a premium which is high, based on your bad credit score. This is independent of the claims that you have filed prior to it.
- Starting a Business: If you are looking to start a new business, you might want a bank loan to help you along the way. However, if your credit record is bad, the amount of money the bank can fund will be limited. Even if you have brilliant data and amazing ideas, it will not help you get any bigger loan from the bank. Your credit record speaks for your loan limit.
- Car Purchasing: When you have a bad credit, even buying a car will be a difficult task. Your credit will either get your application denied or will provide you a loan which has a high-interest If you do buy a car at high-interest rate, you will find it difficult to make the payments monthly and end up in a more difficult financial situation.
- Calls: In general you will not get any debt collection calls because of bad credit. However, bad credit indicates unpaid bills which mean that people to whom you owe money might still call you regarding payment.
There are a number of creditors who offer bad credit loans at the humungous interest rate. Though this might seem like the best solution at that time, if the interest is high, you might not be able to pay off the monthly interest which will lead to further bad credit and affects your credit score in a bad way. Hence, when you use your credit, keep tabs on your credit score.