A low credit rating affects not only finances: what else is at risk

It's practically true: having a low credit score is bad. But you may not even realize that a low credit rating can affect more than just your finances. It can radically change your usual lifestyle, even negatively impacting your mental health. The publication spoke about how a low credit rating adjusts a person’s life CNBC.

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Those with credit scores ranging from 5 to 000 report that their poor credit has affected housing, careers, relationships and even their ability to communicate, according to a new Credit Sesame survey of 300 U.S. adults. For example, about 549% of people with a bad credit history say that they cannot rent the apartment they want, and 28% have been denied access to mobile communications.

Almost 14% of respondents have a credit score below 549. Approximately 17% score between 550 and 639, while 20% have a good score (640 to 719) and 41% have an excellent score (720 to 850).

According to a Credit Sesame survey, respondents with poor credit were generally girls and women without college degrees.

On the subject: Just complicated: how does a FICO rating differ from a credit rating

“I have problems paying bills because my daily life costs me so much and I already work all the time,” said one respondent.

“Bad credit is costly,” says Jay Moon, CEO of Credit Sesame's lending business. — Raising your credit score by just 35 points (from about 660 to 695) could save you $301 a year in interest payments.

But while a bad credit rating can increase costs in the form of higher interest rates and other fees, Moon says the true cost of a bad credit rating is "much higher than just direct financial costs."

There are also long-term implications: About 14% of respondents with low credit scores say they missed at least one job opportunity due to bad credit. And 10% believe their low credit score has led to romance problems.

About half of those with 300 to 549 points cannot buy a house or apply for a car loan. And 57% complain that they have to use cash or debit cards because they cannot get approval to use a credit card.

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The emotional and mental consequences of a bad credit history should not be overlooked. About 79% of those surveyed with a low credit rating note that the situation causes negative feelings, of which the most frequent are anxiety (49%), shame (46%) and anger (30%). More than half, 58%, believe that there are no fair lending options for them, and about 43% say that a low credit rating hurts them beyond measure.

This is in stark contrast to those with a good (640 to 719) or excellent (720+) rating: they feel pride, happiness, and well-being in reporting their ranking. In addition, 2 out of 3 respondents are confident that their scores reliably and accurately reflect their creditworthiness.

How to improve your credit situation

For those struggling with bad credit, Moon offers concrete steps to make a difference.

He recommends expanding your knowledge of how credit ratings work first. Services like Credit Sesame and Credit Karma, as well as many credit card companies, allow you to access and track your credit score for free, so you can see how spending habits can affect your account.

In addition to what you need to know about your personal bills and expenses, Moon advises paying attention to what's happening in the industry. For example, earlier this year, Congress and private lenders launched a series of abstinence and deferred payment programs to help those financially affected by the COVID-19 pandemic. If you're in trouble right now, Moon recommends taking advantage of these programs and making sure that you can maintain a good credit rating.

On the subject: 7 unexpected mistakes that can lower your credit rating

The expert also advises those with lower scores to pay attention to some upcoming innovations that could provide a much more complete picture of creditworthiness. For example, Experian Boost allows consumers to link their monthly utility and telecommunications bills to get credit.

A good way to improve your credit score is to think of it as fundamental to your overall financial health and well-being, Moon says. Just like when you exercise and eat right. In his opinion, consumers should take proper steps to control their credit score or even improve it.

Read also on ForumDaily:

Just complicated: how does a FICO rating differ from a credit rating

7 unexpected mistakes that can lower your credit rating

How Various Financial Transactions Affect Your Credit Score

Three ways to clean up your credit history

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