A large percentage of the potential home-buyers I speak to have a basic knowledge of how credit scores influence the interest rate received when they finance their home purchase. Most understand the basic principal: The higher their credit scores, the lower their interest rate.
I read a CNBC article today entitled, “How poor credit costs you on homeowners insurance”. It delivered a strong message. Poor credit scores cost you.
In that article it was reported that: “Homeowners with median credit pay 29 percent (29%) more than those with excellent credit.” 29%!
Ouch!
But the “hits” you take for lower credit scores go beyond higher insurance costs. And even small dips or variations in scores can cost you … and cost you in a variety of ways. Not all of them monetary.
Examples:
Rent: Not ready or interested in becoming a homeowner? Low credit scores can loom large even when you rent. Lower credit scores can indicate to a Landlord that you’re a larger security risk.
As a result, Landlords may demand a larger deposit be placed on the property you hope to rent. If you want to protect yourself with Renters Insurance, your lower credit scores will make it more costly to carry.
Utilities: Electricity, gas, water, and garbage pick-up. The deposits required for establishing those services may be higher as a result of your lower credit scores. Extremely low credit scores may result in services being denied completely. You’ll find much the same when applying for cell/internet services.
Jobs: Your livelihood can be jeopardized. Some professions regulated by the government require licensing. Credit reports are run as part of the professional’s licensing requirements. As a Mortgage Lender, I’m subject to this practice. If you’re a professional within such a field and have low credit scores, it could prove very problematic for you.
Entrepeneurs: Hoping to start a new business? Access to the funds/credit needed for start-up could be limited or non-existent. The interest rate charged on a business credit card will be higher.
Car: Need a car to get you to your job? If financing is involved in your car purchase, your car loan will cost you more than it would have if you’d had good credit. So’s the credit card you carry to buy gas for that car.
Love-life: And did you know that lower/poor credit scores can also hurt your chances of forming personal relationships?
A 2013 survey conducted by FreeCreditScore.com revealed some staggering statistics: “While 57% of men say that credit scores play into their dating decisions, a staggering 75% of women said they consider the numerical rating”. Again I say “ouch” …
The facts are very clear: Poor or low credit scores hurt you in a myriad of ways. They cost or hurt you in almost every facet of your life. But if you presently have low/lower credit scores, what do you do?
Seek help. Get expert advice. Take action to correct any errors that might exist on your Credit Report. Do the follow-up needed to fully-address those errors. Stick to the plan devised to raise your credit scores. Don’t become discouraged. Improvements take time.