The credit history of each and every debtor is maintained by the Credit History agencies. Credit history stands for the repayment history of debtors to find out if the debtor has repaid his debts on time without any default. Credit history of an individual is depicted with scores. An individual can have bad credit history or good credit history based on his payment track record.
When an individual has defaulted in repaying his debts he is sure to have a bad credit history. In the USA, credit history of an individual is ascertained with scores that range between 300 and 800. Scores ranging from 300-650 are considered to be very bad to bad and scores higher than that are termed as good.
Since every financial institute as well as lenders check the credit history of a person before the sanctioning of a loan, a bad credit history is sure to have its consequences.
- Non-approval of loan applications. Since bad credit history means that at some stage the person has defaulted in repaying the money back, the risk of the credit card applications and loan applications not getting approved are high.
- Lessens chances of getting apartments on lease. A bad credit history will discourage landowners from leasing out their property.
- Attracts deposits as collaterals. A bad credit history will make the person deposit extra money as security against repayment of loan amount. Sometimes mortgages too are required on part of the defaulter to secure the supply of daily utilities like electric and phone connections.
- A bad credit history attracts higher interest rates on loan amounts. Since credit companies will always fear the repayment capability of defaulters, they are sure to charge greater interest rates on the loan amounts of the person.
- Insurance companies too check the credit history of an insurer. In case the company feels that the person might again default in payment of the premium amounts, they charge higher premium amounts.
- Jobs in the financial industry do not get approved if the prospective job seeker fails to score well in his credit history.
- A bad credit history makes it very difficult to obtain loans and start business programs.
- Lastly, a bad credit history or any kind of default in the repayment of loan amounts will call for harassment from debt collectors.