How a Bad Credit Score Affects You Negatively


Having a bad credit rating as a US citizen can have a very bad impact on the opportunities that arise when trying to live your life. As you probably know, people with bad credit tend to face a lot more challenges and obstacles than those with good credit, while they get hardly any benefits or features.

Some of the most common issues are the inability to get a loan or open a new credit card, but that’s pretty minor compared to bigger issues, like the inability to rent an apartment or even to find a job. These are life-changing issues, and we want you to be fully aware of the effects that bad credit has, so you know exactly what is at stake.

What is a bad credit score?

Let’s start at the beginning and explain what is considered a bad credit score. Although there are several credit score models, we will use the most commonly considered, which is the FICO credit score. This model groups credit scores into 5 categories.

  1. Exceptional Credit (800+)
  2. Very good credit (740-799)
  3. Good credit (670-739)
  4. Fair Credit (580-669)
  5. Bad credit (579 and under)

According to 2020 data, the average credit score of US citizens was 711, which means the average credit score is considered good. These are intermediate levels, which are good enough to take out a loan, open a credit card, etc., as you need a minimum of 670 for these options to be open to you. Naturally, the higher your credit score, the better.

But what if your credit score is considered fair or even bad? Well, there are effects that will have a huge impact on your life.

What happens if you have a bad score?

The effects of bad credit can stretch far and wide, as credit extends to so many areas of the professional and financial lives of every American citizen. So if you have bad credit, you might experience some or all of the following problems.

1. Very few credit card options (with high interest rates)

If you have bad credit, you will likely find it very difficult to get approved for a credit card. As for regular credit cards. This is because credit card issuers will check your credit score and consider you a risk, seeing you as someone who is unreliable when it comes to paying their dues, and so they won’t take the risk of offering you a credit card. However, there are still credit cards available to you, such as secured credit cards or credit cards designed specifically for people with bad credit. However, they don’t offer the benefits you’d get with a regular credit card, and you’ll likely get much higher interest rates – often twice as high as people with regular credit cards get.

2. High insurance premiums

Bad credit can also have a negative impact on your insurance, as insurance companies will assume that you are likely to miss your payments, and so they will charge much higher insurance premiums.

Insurance premiums are generally based on credit-based insurance scores, which is different from a regular credit score. But, credit score still plays a role, and if it is bad, you will suffer the consequences.

3. Expensive car loans

Getting around the United States can be quite a challenge without a car, which is why most people choose to purchase a vehicle. The easiest way to do this is to take out a car loan, but again, your credit history could interfere with the process. Your application may be rejected entirely, and even if not, it will still have a big impact on the type of rates you get. To put that into perspective, a good credit rating can result in interest rates of 4.19%. A bad credit rating can drive up interest rates more than five times, leading to interest rates as high as 20%.

4. Extreme mortgage rates

High rates won’t end with car insurance rates either. Mortgage lenders, for example, will also be hesitant to help you, because they’ll assume you’re more likely to default on your mortgage. Technically speaking, there’s no credit score threshold you need to cross to qualify for a mortgage, so no matter how bad the situation, you won’t automatically be disqualified. However, it is possible for this to happen. And even if you don’t and you get a mortgage, your mortgage rates could be astronomical.

5. Impossibility of renting an apartment

Even something like renting an apartment and securing a roof over your head can be seriously affected by bad credit scores, as most landlords will do a credit check to understand who they are dealing with. Based on this, they’ll compare apartment applicants and likely choose the person with the best credit rating, as they’re much more likely to pay the rent on time.

To be specific, landlords won’t be able to see your accurate credit score, but they will see your credit report, specifically your payment history. They will be able to see if you have been deported in the past, and they will draw their conclusions based on this data. It’s true that not all landlords will do this, but major property management companies will almost certainly go through the process when deciding who their next tenant will be.

6. Security deposits for utilities

Utilities providers are also known to take users’ credit report, especially focusing on their payment history, in order to create their account and decide whether or not to accept a deposit for their services.

According to the FTC, utility companies that require deposits must request them from all or none of new customers. And, while companies have been known to waive deposits as long as the new user meets their credit requirements, those who don’t are likely to be charged a deposit during the account setup process. This can sometimes be avoided if the customer can provide a letter of guarantee signed by someone who would be willing to agree to make payment on the user’s behalf, if the user cannot do so themselves.

7. Rejected Applications

Many people don’t know this, but bad credit can even have a negative impact on your chances of finding a job. When you apply for a job, your employer may look at your credit report to assess your responsibility and reliability. Again, they are more likely to check your payment history and see if you have a history of being late with payments, if there is a history of defaulting on loans, etc.

8. Inability to start your own business

Starting a business is a great way to ensure stable funds, and if you have a good idea and an even better business plan, you might even turn it into a great business. However, to get there, you first have to get started, and that takes money – an initial investment that is entirely up to you. Most people would take out a loan to get started, but that can become difficult or impossible again without a strong credit score. And, as mentioned earlier, even if you managed to convince the lenders to grant you the money, they will likely charge massive interest rates.

How can you turn the tide and build good credit?

As we have just seen, the situation can end up getting worse if you allow your credit score to plummet. However, there are ways to offset this and establish a healthy and strong credit score and credit report. Here are the top 5 tips on what you can do to fix things.

  1. Make your payments on time. The first and easiest thing to do is to start making your payments on time. Don’t allow yourself to be late because your payment history makes up 35% of your total credit score. And, as we’ve seen, landlords, lenders, jobs, and just about everyone else will definitely check your payment history before they even consider working with you.
  2. Pay your old debt. In your credit report, you have a part called the credit utilization ratio, which shows your available credit compared to your current debt. This ratio represents 30% of your credit score, and the more debt you pay off, the better it will look.
  3. Get a new credit card. As mentioned, a bad credit score can prevent you from getting a regular credit card. However, you can still get secured credit cards or credit cards for people with bad credit. Both are easy to receive and can help improve your credit score if you use them responsibly.
  4. Check your credit report. The system isn’t perfect and mistakes can happen, even with your credit report. That’s why it’s a very good idea to keep an eye on your own credit report and see if there are any mistakes that could lower your credit score.
  5. Monitor changes in your credit score. Finally, we recommend that you keep an eye on your credit score itself and see how it changes as you start making responsible financial decisions.


Living with bad credit will rob you of an incredible number of opportunities that would otherwise lead to a better and more successful life, and you need to be aware of what’s at stake. With this knowledge, you can now set out to fix the situation, improve your score and keep it at a greater height. Anyone can do it with the will and enough discipline, and before you know it, new opportunities will start to open up.


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