By the time they reach adulthood, most people have gotten at least one credit card, and many people have more than one, often more than they need. Unfortunately because of this, so many also never learn how to properly use credit in a responsible way, which can result in debt they can’t get out of and a bad credit score and history as a result of it. Credit can affect your adult life in a number of ways for years to come if you aren’t careful. Here are a few of those common consequences of having poor credit and misused financials.
Financial Burden Hanging Over Your Head
First and foremost, if you have not had the best of credit history dating back to your earliest days of having a credit card, it can feel like a weight on your shoulders all the time. This weight and burden can continue on for years until you are finally able to effectively and fully pay back your debts. It’s not easy to pay back accumulated debt as the interest rates are typically high on credit cards, and compound with each bill making payments less effective when it goes toward newly accrued debt.
When your credit is less than fair, it can be a huge burden that can adversely affect your everyday life and create more worries that you don’t need to add onto your life. It goes beyond just having a poor credit score and affects buying opportunities, rental applications, even job applications as some employers view your creditworthiness as symbolic of your reputation as a trustworthy employee.
Fewer Borrowing Options
When you have poor credit or no credit at all (which can be just as bad or worse than if you had poor credit), you will likely have fewer options should you need to borrow money. While you may qualify for a loan or additional credit card, you may find you are faced with higher interest rates as a result of having poor or no credit. Lenders see poor credit signals as a sign that you may not pay the money back and therefor feel a higher interested rate would dissuade someone from purchasing more than they can afford to pay back.
Without a good credit history, creditors are likely to consider the loan as a higher risk, whereas some credit options may not be available at all. Some credit cards come with immense perks that include discounts, cashback, and points that can be redeemed for free products, travel, and more.
With poor credit, you are typically not qualified for these types of cards and are at a further disadvantage for earning those perks. Although you always want to work toward an excellent credit score, there are still options available for those with poor or no credit history. You can consider working with direct lenders for bad credit personal loans that cater to individuals who have less than perfect credit. This type of lender could be a good option if you are faced with an unexpected emergency expense, and don’t have the savings to cover it.
Jobs and Housing Hardships
Unfortunately, another big part of your poor credit history as an adult means you may not qualify for certain jobs or housing. Certain employers and landlords require a credit check, which means that if your credit is not at least in the “good” range, you can swiftly be denied the job or apartment you want.
Certain types of jobs, particularly those in the finance or investing field or in business or management, make good credit history a requirement. While these employers don’t check your credit score, they do check your credit report. Your credit report will show things like unpaid bills, bills that were paid later than their due date, and other marks that lenders would consider “poor credit.”
Landlords want their tenants to have a good credit history because they want to be ensured of being paid rent in full each month. If your credit report has too much negative information, they can see you as a potential risk of not paying your rent. When you do find housing that accepts you, your security deposit may be higher than it would if your credit was good.
Some landlords will require two or more months of rent upfront to consider renting to someone with a poor credit history, which means you will have to save more money for a longer period of time in order to move, a burden that someone with decent credit would not have to carry.
Higher Deposit on Other Things
In addition to a higher security deposit when seeking an apartment, you can also expect other things to require a larger deposit. For example, if you are looking for a new cell phone carrier and want a contract, with bad credit, you could be rejected, be required to pay a higher deposit on your phone, have to find someone with good credit that is willing to cosign for you, or only rely on prepaid service.
Unfortunately, unless you already own an unlocked, compatible phone, the cost of the phone itself is higher when you go this route. This is another case where someone with poor credit history is required to have more upfront money to enter into agreements, whereas someone with good credit does not have to face these same burdens.
Wrapping it Up:
At the end of the day, although we may not like it, credit and our fiscal history is a piece of life as an American, and we can either use it to our advantage to get ahead in life, or misuse it and suffer the consequences that go along with it.
These are some of the most notable downsides to how credit can negatively affect your life as an adult for years to come in many different ways. However, if you learn how to be more responsible, manage your money appropriately, and don’t overspend outside of your means, you can improve your credit with time and commitment and reduce your long term financial stress.