Having bad credit obviously keeps you from being approved for larger loans or higher credit limits, but bad credit can also cost you money in the long run. If you have been putting off improving your credit score, you might want to consider these ways that it could be costing your money:
Higher Interest Rates
Bad credit can cause some serious issues when it comes to interest rates. The lower your credit score, the higher the interest rate you may be charged. This goes for almost any financial situation; credit cards, loans, mortgages. So if you own a car, house and credit cards, you could be wasting thousands of dollars a year in high interest rates. Even raising your credit score a few points could lower your interest rates enough to save money. If your credit score has changed since opening a loan, look at refinancing to lower your interest rate.
If you have a really high interest rate on your credit card and can now qualify for better credit cards, it would be a good idea to sign up for a balance transfer credit card. Many balance transfer credit cards come with a 0% intro APR perk so that you don’t have to pay interest on your balance for up to a year and a half. Here’s a list of good balance transfer credit cards that offer a 0% intro APR.
Larger Security Deposits
If you are renting an apartment or applying for a mortgage, you may have to put up a lot more money up front. Most landlords don’t trust people with bad credit, so they will be more likely to charge a larger security deposit. You also might have to put down a larger down payment on a house if you want to qualify for a mortgage with bad credit.
More Expensive Insurance Premiums
Insurance companies will look at your credit score to determine your risk when it comes to paying your monthly insurance costs. If your credit score is bad, your insurance premiums are almost guaranteed to go up. Before you look into insuring your car, your house or anything else, you might want to figure out a way to raise your credit score. If your credit score has changed since getting your insurance, it might be a good idea to see if you could save by switching insurance companies.
Don’t want to pay extra? Here are a few ways you can raise your credit score easily.