Finances are hard, right? There’s good credit, bad credit, good debt, bad debt, and even complex equity deals on a home half-owned by you and the bank. It’s no wonder the average household debt excluding a mortgage is £8,000. As a cynical person, it’s easy to dismiss the terms as pointless. However, the phrase “good credit” is something which will stick with you for life, mainly if you don’t have any. Yes, it is possible to get a loan if your score is under 550, but the costs are high.
Here are some of the consequences of having terrible credit.
The traditional lenders won’t touch you with a barge pole. The reason is simple: they can’t trust you to pay back the money. Bankers may be plenty of things yet they aren’t stupid. Lenders play the game their way and you have to prove to them that you are capable of following suit. So, when you ask how long does a foreclosure stay on your credit report and the answer is seven years, then you’re in trouble. Yep, it might be 2,555 days before a bank even lets you in the door, never mind entertains an application. When you need money, what will you do in the meantime?
You’ll Make Bad Deals
The only option is to negotiate a private loan with a broker, also known as a loan shark, or a payday lender. Now, the latter will seem like a better option, and it is because at least there isn’t the threat of violence. Still, the interest payments are ridiculously high and impossible to keep up with if you don’t pay the loan back in time. Even though the government regulates them, the typical APR can be as high as 1,509%. All this does is add to your debt levels.
You’ll Stay In A Dead End Job
There are multiple reasons for this. The first is that you have so much debt that you can’t afford to miss a payment. Quitting and going one month without a steady paycheque is enough to send the household into a financial death spiral. When you have a family to think of, this is unimaginable. Secondly, it’s not as if you can create a business of your own. To start a startup, the founder needs money and you won’t be able to secure funding thanks to your poor credit rating.
They’ll Turn Off The Electric
It’s crazy to think that energy companies can do this, but they say they’re lending you one month’s worth of gas and electricity. As a result, much like a bank, they want to see a credit report to check whether you’re good for the cash. A bad rating, then, can persuade British Gas to turn off the lights with you and your family inside the building. And, it doesn’t stop there as the same applies to TV and phone bills.
Anytime you need to borrow anything, the lender will check your credit report. That’s why a strong rating is essential.