Bad Credit Equals Higher Prices
It is true that just when you hit the worst point of your financial life, your life will start to get more expensive. People with good credit pay less for lots of things, and they also have a much easier time getting financing they may need. People with poor credit will pay more, and they may even get declined for some loans or other services.
It may seem impossible to solve this problem, and some of the solutions that people turn to only make the problem much worse. However, many people have pulled themself out a bad credit rut so they can enjoy a more comfortable financial life.
What Costs More When You Have Poor Credit?
- You probably already guessed that the interest rates of almost any type of loan will be more expensive and harder to get.
- Some services, like insurance, are also more expensive if you have poor credit. This may surprise you, but insurance companies have fought hard for the right to use credit scores to predict risk. Higher risk equals more expensive premiums. Not all states allow this, but many do.
You may be thinking that people with bad credit should not be going out and applying for loans anyway. But what if they need money to see the dentist or repair their home heater? Some emergencies cannot wait until there is enough cash in the checking account to pay for them.
People with good credit can just apply for a loan, usually from the service provider, and get the emergency handled. People with poor credit may be turned down. If they are accepted, they will certainly have to pay higher interest rates.
And having financial problems does not mean that people will be able to do without their cars. People with poor credit still need to get to work or go to the grocery store. However, in order to drive legally, they will need auto insurance. If they own a home, they will still need a policy for that too!
Poor Credit Management Plans
So what can you do to help yourself?
- Of course, you should attack the problem as quickly as possible. You can get a copy of your credit report to see where the problems are. Try to deal with those issues as quickly as possible. However, I understand that some of the issues cannot be solved in a few weeks.
- Look for an insurer who will also credit you with discounts for things you do right. If you are a good driver, can bundle policies, or qualify for other discounts, it may offset the rate increase you got for a bad credit rating. There are also “no credit check” insurers, but I am sure they have already raised their premiums to cover themselves for people with financial problems.
Bad credit really does make life harder.
You find it harder to qualify for loans, and may have to pay more for some debt you already have. Meanwhile, because of your financial problems, it is harder to dig yourself out of the problem. Be wary of some shady offers to fix your credit though. A good place to start is actually at FTC.gov – the Federal Trade Commission website. They offer free financial help for Americans.