The High Cost of Bad Credit

high cost of bad creditI put together an article called The Cost Of Bad Credit – More Than Credit Cards Rates because it seems when people talk about bad credit scores, it’s mostly about credit card rates. While these certainly cost people with poor credit quite a bit of money with higher interest rates and extra fees that credit card companies charge to those with poor credit, having a bad credit score will hurt you in a lot of other areas as well. These include getting other types of loans such as mortgages and car loans and will also cost you more with insurance rates. I put together a bit of an estimate of what the poor credit may cost, but I really need to go through and make some estimates to give a better overall idea.

I also know that I’m missing quite a few areas where those with poor credit scores get dinged and have to pay more (if you know some areas I missed, feel free to leave a comment) – would like to expand those too and try and put a dollar value to them too. It’s a good start and foundation on information, but I’d like to dig deeper and make it a quality resource page.

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3 Responses to The High Cost of Bad Credit

  1. IRA says:

    Job opportunities. Certain employers (e.g., banks) will ask for permission to check your credit score as part of the interview process. I guess they figure that your more likely to embezzle funds or engage in some other type of illegal activity.

  2. Aahz says:

    Let’s see…

    I had to pay a total of $185 (plus $6/month) just to get a credit card with a $200 limit. INterest rate is only 9.9%, but that’s irrelevant as I never carry a blance anyway.

    I also never get to take advantage of those “apply for our card, get a discount deals” that they have at various retailers where you can save anywhere from 10%-20% off that day’s purchase if you sign up for a card.

    I have zero opportunity to play the 0% Balance Transfer/High yield online savings arbitrage game that so many people blog about.

    Because I can only get the low limit credit card I frequently miss out on great deals that expire only a day or two before my paycheck arrives. With a higher credit limit I could take advantage of the deal on credit and still pay off the card before interest kicked in.

    Bad credit makes renting a home/apartment MUCH more difficult and sometimes more costly as well.

    I’m sure there’s more, but those are just off the top of my head.

  3. makingourway says:

    Jeffrey, I think you’ve got a great topic here.

    I want to very strongly emphasize the cost of credit scores on insurance. I have some friends in the industry and a bad credit score can really increase your premiums.
    We had an error in our credit report that boosted our auto premiums about 25% each month. It was only resolved when we switched to a carrier that did not use credit scores to calculate insurance premiums.

    Aahz, good idea bringing up apartment rental.

    I shouldn’t editorialize, but I feel it’s important to emphasize the transitory benefit interest rate arbitrage between credit cards and MM accounts yields. With a low limit and having to pay high fees it sounds like you need to concentrate on building up your credit limit – that game is more than likely to hurt it.

    Earning money and saving it is the key to buiding interest income. But if you really want to make money using OPM, you’ll need to start a business or create real estate investments.

    Credit scores can also influence the deposits you may need to make. If you don’t have a perfect payment record with your utility company, they may require you to put down a cash deposit. That could cost $250 or more.

    Good luck with the topic.

    Making Our Way

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