Credit cards are considered to be the easiest way to create credit history. Most often than not, people who obtain their first credit card use it without restraint and caution. By the time they realize, they end up facing debts that are beyond their means of repayment. Therefore, instead of creating a good credit history, they end up with a tarnished report that has a greater impact than they can ever imagine. If you thought that bad credit history just hampers your chances of getting your next credit card or loan, think again. Let us take a quick look at the adverse impact of bad credit.
Once you have accumulated huge debts on your existing credit card, you can forget about the chances of getting a new one in the near future. Almost all banks and financial institutions check the credit report of the applicant before approving or rejecting their application. If your credit score is below average, you can be sure your application will not see the light of the day.
Bad credit history not just hampers your chances of getting a new credit card or loan; it also impacts your existing one. When you begin defaulting on your payments, financial institutions classify you as a high risk candidate. Since you become a liability to the institution, the interest rates on your existing card and loans are increased, thereby making it even more difficult for you to repay it.
Unfortunately, many prospective employers also review the credit history of the applicant before issuing the employment letter. If you have a number of outstanding bills, loans or bankruptcy listed on your report, you may have to let go of the job you have been waiting for.
Auto insurance providers assess the credit report of the buyer before issuing a policy because it has been noted that people with bad credit history are the ones who file a number of claims. The credit history also displays the ability of the person to make payments on time. If you have a bad credit history, you will have to be prepared to shell out more for the policy since providers classify you as a high-risk candidate.
In addition to all this, bad credit also prevents you from getting a good cell phone contract or an apartment on rent. Hence, it is imperative that you take adequate measures to repair bad credit at the earliest to overcome all these problems.