At this point you’re probably all on board with the idea that “good credit” is a good idea. Of course it’s good! We say it all the time, so we’d look pretty shady if it turned out to not be true.
So, similarly, you also know that “bad credit” is bad. And it’s bad because it stands in the way of you getting the things you want and need. Bad credit means that it’s difficult to get a loan, which means that it’s difficult (or nearly impossible) to get the house you want or the car you need.
The inability to receive credit (or receive credit with reasonable terms) isn’t the only problem that comes with having a bad credit score. There are quite a few less obvious ways that an unhealthy credit score can cost you.
Finding a job
A potential employer has the right to pull a copy of your credit report and many do. In 2012, 47% of employers reported using credit checks during the hiring process.
What does your credit report say about your ability to perform a particular job? Not much actually, but for a competitive position, a candidate with a better credit score may be perceived to be more responsible or to have more integrity. That doesn’t mean it’s true, of course, but when evaluating similarly qualified applicants, a bad credit score can easily be the factor that pushes your name off the pile.
Renting an apartment
Since there’s no borrowing of money involved, we sometimes forget that even if you aren’t buying a home, a bad credit score can impact your ability to find a place to live.
Many landlords require credit checks as part of the application process. Often they’re looking for prior broken leases, but some also have credit score requirements. Even if you’ve never been late with rent once in your life, a poor score can disqualify you from the apartment you really wanted.
Finding an inexpensive insurance policy
Insurance companies pull your credit report when creating your policy and if what they see is a low score it will often cost you with higher premiums.
That might not seem fair, but insurance companies have found that consumers with lower credit scores tend to be in more accidents. So, just like males under 25 years old pay higher premiums simply for being under 25, consumers with bad credit end up paying more for their premiums (regardless of their driving record).
Signing up for utilities
The ability to get gas, water, and electricity in your home should be a given (and in many places, thanks to government legislation, it is), but bad credit can make the process a little more complicated.
Most utility companies will pull your credit report when you attempt to sign up for service. If your score is too low you’re consider a risk and made to pay a deposit before the services will be activated. That deposit can be pretty steep and will often vary, depending on just how poor your credit score is. The deposit should be returned when you move or switch providers, but that’s money you could otherwise use, sitting out in the ether, not collecting interest.
Finding the best cell phone plan
You probably don’t think of your cell phone in the same way you think of your other major utilities; likely because your utilities are so closely associated with your physical home, while your cell phone goes everywhere with you. If you have bad credit, however, your cell phone can cost you in just the same way as your other utilities – with a big deposit up front, or possibly no service at all.
Enlisting in the armed services
All candidates for a position in the US armed forces are subject to a credit check. How much that credit check is weighed in your application depends on which branch or service you’re applying to. No branch currently has a minimum score requirement, however your ability to successfully manage your finances is a consideration in every branch.
Perhaps more importantly your ability to advance your career in the service may be severely undermined by problems with credit. Many upper-level security clearances do have minimum credit score requirements and an inability to obtain those credentials could very quickly stall out your career progression.
Obtaining professional licenses
Your ability to obtain a necessary professional license may be hampered by poor credit. Most major licensing bodies require a credit check as part of the licensing process. A loan originator, for example, may be barred from obtaining a license if their credit score is too low. A contractor with a low credit score, meanwhile, would have to pay substantially more for license bonding.
Finding a suitable senior care facility
In certain circumstances, seniors are consider to be “judgment proof” and advised not to pay their debts. While it may be true that collectors would not be able to extract funds from these seniors, not paying their debts does cause their credit score to plummet. Since seniors are less likely to seek loans there’s an assumption that their credit score no longer matters.
In many cases that may be true, however, most assisted living facilities include a credit check as part of the application process. A badly damaged credit score could very likely keep seniors out of their preferred housing choices.
Managing a healthy long-term relationship
Living on your own, you may be able to manage the restrictions of poor credit just fine, but your significant other might not. Over half of married couples who report being unhappy cite financial problems as the reason.
There’s no way to accurately quantify how a bad credit score might impact your relationship, but you do know all the ways that it will limit you as an individual. Those limitations, in many ways, are then imported into your relationship, meaning your partner (who may have perfect credit) now has to deal with those limitations as well.
Bad credit can be a big thorn in your side, but the sooner you start to address your issues with credit the sooner you can stop worrying about the things your credit is keeping you from, and start focusing on reaching your big picture goals.