2022 Boise Idaho Real Estate Blog

What Your Low Credit Score Costs You

Main Boise Home Loans

In the past, a lower credit score simply meant that you would pay a higher rate of interest on a car loan or wouldn't qualify for a mortgage. And while that is still the case, there are much broader ramifications for having poor credit. When your scores are low, you will pay more for EVERYTHING!

It is utterly amazing to me at how much the general public DOES NOT UNDERSTAND about credit scores and how they are calculated. But even more dangerous to them is that they don't know the true scope and true cost of poor credit. Outside of the home mortgage ramifications (which will be in the next post), here are some other important ways that low credit scores hit consumers in the wallet.

EMPLOYMENT OPPORTUNITIES -- I work for a bank, and believe me...I WOULD NOT have this job if I didn't have good credit. My bank, as well as many other lending facilities, government employers, insurance companies, and accounting firms...WILL NOT hire you if you have poor credit. You can be the most qualified and likable person in the resume stack. So sad, too bad.

AUTO LOANS -- Have you seen the ads on TV? You know, the ones that say you will pay 0% or 1.9% interest with no money down? If you saw something like that, you may not have read the itsy bitsy fine print at the bottom of your TV that says something like, "This offer is predicated upon borrower having exceptional credit."

STUDENT LOANS -- With college tuition inflation seemingly out of control, parents and college students most often turn to student loans to fund higher education. Sometimes, parents will try to make up the difference with a Home Equity Line of Credit (HELOC), but if your credit scores are lower, getting a HELOC will probably be impossible.

ENTREPRENEUR -- Want to start your own business? Even if you have the best thought-out business plan and available target market to start, lenders will be skittish about lending to you if your scores are low.

CREDIT CARDS -- Have low scores? In this "New World" of credit crunches and subprime collapses, prepare to be denied or pay interest in excess of 20% (minimum) for a credit card.

CHECKING ACCOUNTS -- If you have non-sufficient funds records filed against you, many banks will to open checking accounts for you. Try to live in this world when you have to pay cash for everything you do!

RENTING -- I am a landlord, and believe me...I like it when the rent check clears and I get paid. I personally check the credit of my tenants, and WILL NOT rent to someone with a credit score of less than 650 for any reason. And no, I am not the exception to the rule.

INSURANCE RATES -- Many auto insurance companies will use your credit score to "risk price"  your payments and payment schedules.

RETIREMENT -- If you are paying so much more for everything I have outlined above because of your poor credit, I would bet that retirement savings are not happening for you. Most people with poor credit simply do not make enough money to pay the higher costs of everything in this list AND save for a comfortable retirement. What will you do when you do not have retirement savings and Social Security is not around when you think of hanging up the working life for good?

Best Regards,
Eric Leigh

 
Posted by Eric Leigh at 2/6/2009 11:46:00 AM

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