There are some reasons why you have a bad credit score. That doesn’t mean that you are irresponsible for not paying your payments on time, it might sometimes be due to a few unexpected situations you face which have put you in a difficult situation.
Whatever the reason is, if there is a poor credit on your name, you should know how it effects your financial freedom or does bad credit mean you pay more. So, once you know about them, you can try to fix them and increase your credit score.
Having bad credit is going to hurt you
If you have a poor credit score, you are going to be seriously impacted financially. The first thing is that you can be denied any more credit. A low credit score always signifies that you are a risky borrower and so most of the lenders wouldn’t want to lend you any money.
The second thing is that even if some of the lenders agree to lend you money, they will charge you much higher rate. The money you borrow is going to be much more expensive for you. Either you have pay more in fees, or your interest rate will be much higher, which will increase your monthly payment. This type of loan is called “subprime loans”.
If you have a negative credit score, this can have a serious effect on your mortgage process. If you want to apply for a mortgage, your past and current mortgage history will be dealt with. There are limits of how many times you can be made the late mortgage payment. The same criteria will be applied to the loan you are applying for. And if you had a bankruptcy, you will have to wait for a period before you can apply for another mortgage. Also, this depends on the type of bankruptcy was filed before and the type of loan you are applying for.
You can read this study by a lending tree, which will help you a lot in your quest to know more about improving credit score.