Your credit score is a measure of how responsible you are with your money and how likely you are to pay your debts. It can have a huge impact on so many different areas of your financial life, but a lot of people don’t realise just how important it is. Even though they have a general sense that they need to improve their score, they think that it’s something that they can put off because it doesn’t have a direct impact on their life right now. However, there are plenty of real world situations where having a bad credit score or no credit score at all could really hurt your finances. Here are 3 situations where having a bad credit score will make life difficult.
Buying A House
The most obvious reason for improving your credit score is so that you can buy a house. When you apply for a mortgage, they will do a credit check and if your credit score is very bad, you may not be able to get a mortgage at all. Even if you can get one, the interest rate on it is likely to be very high and the bank will ask for a bigger down payment on the house. That means that you will be paying a higher mortgage for years to come, all because your credit score wasn’t good. But if you spend some time fixing your score before you apply, you will get much better deals on your mortgage.
Buying A Car
If you are lucky, you will be able to afford to pay for your new car outright, but most of us don’t have that luxury. In most cases, people will use a financing deal to buy a new car. But when you get a financing deal, they will check your credit history and your options are very limited if you have a poor score. There are some great companies like Direct Car Credit that have solutions for people with bad credit, but you are likely to pay a higher interest rate and you will not be able to borrow as much. This means that you have to make compromises in terms of the kind of car that you buy. It’s much better to spend some time improving your score before you apply for a car loan.
Getting A Phone Contract
This is one that surprises a lot of people because they do not realise that they will be subject to a credit check when they are taking out a phone contract. Although the credit requirements are not that strict, having a very low credit score or not having one at all could mean that you are not eligible for a contract phone. Contract phones are usually much cheaper than using pay as you go, which means that your poor credit score is actually costing you money. If you are unsure about your credit score, you can check it online for free and if it is bad, there are some simple things that you can do to fix it.