What are the Consequences of a Poor Credit Rating?

The consequences of a poor credit rating can extend to almost every area of life. The somewhat obvious consequences of a poor credit rating include increased interest rates and lowered credit limits on existing credit cards, as well as difficulty securing financing for other loans, or getting another credit card in the future. In addition, however, a poor credit score can make it more difficult to get an apartment, to sign up for monthly utilities without a large deposit, or even to get hired for a job.

A credit rating can suffer for a number of reasons, but typically it involves unpaid bills or credit cards. Making late payments or missing payments altogether can quickly cause an individual's credit rating to suffer, which tends to have a bit of a snowball effect. Immediately, when an individual gets a poor credit rating, the interest rates on existing credit cards will generally go up, often without warning. In addition, the credit limit on the card may be decreased. Creditors will sometimes lower the limit on the card until it reaches the amount that has been charged to the card; then, the credit card appears maxed out, furthering damaging one's credit.

Aside from the immediate impact on credit cards, a poor credit rating can make it more difficult to get all other types of financing. It may be difficult or impossible to get a car loan or a mortgage, requiring a huge down payment, a high interest rate, or both. Unsecured personal loans without collateral are virtually impossible to get with a poor credit rating. In addition, utility companies such as telephone, gas, cable, or a cell phone company, just to name a few, may refuse to offer service unless the individual provides a security deposit that is held by the company.

Finally, a poor credit rating will usually cause an individual to be required to pay higher premiums for car insurance and sometimes health insurance. This is because one may be seen as a greater risk by the companies due to the irresponsible behavior of not paying bills on time. Landlords will frequently check credit scores, and may refuse to offer an apartment or may require a larger security deposit, or a cosigner. In addition, employers frequently check credit scores as well, and some employers will not offer an individual a job if it is shown that he or she has a poor credit rating.