The 10 plagues of bad credit

Just like the Egyptians in the Old Testament, people with poor credit scores face hardships and difficult scenarios.

By MSN Money Partner Mar 26, 2013 1:54PM

This post comes from Jeanne Kelly at partner site Credit.com.

 

Credit.com logoYou may not even realize the impact bad credit has on your life, but if you take a close look, you'll see that it is likely costing you money, time and even relationships.

 

Image: Couple arguing (© Turba/zefa/Corbis)In the Old Testament, the people of Egypt suffered 10 plagues because Pharaoh wouldn't allow Moses to lead his enslaved people away. Today, we may not have to worry about locusts or boils, but there are 10 plagues that we can face when enslaved by bad credit.

 

Check out this list and consider which ones are impacting your life right now (or may impact your life in the near future) and take action to turn your credit around.

 

1. Lack of access to money. Sometimes life throws a curveball and you end up unexpectedly needing money, perhaps to pay off a medical emergency or to help out a loved one in need. Bad credit reduces your access to money, which makes you more vulnerable during emergencies.

 

2. Higher interest rates. When you are able to borrow money in spite of bad credit, lenders consider you a "higher credit risk" and charge a premium to lend money. Higher interest rates can add hundreds, thousands, or even tens of thousands of dollars onto a loan. This takes money out of your pocket that could be spent on other things.

 

3. Higher down payments. Borrowing money (especially for the purchase of a house or a car) frequently comes with a down payment requirement. And lenders may require a higher down payment from higher credit risks -- which can be challenging if money is tight.

 

4. Risk of job loss. Some employers check employees' credit reports. In highly competitive jobs, or among employers who feel that negative information on a credit report may lead to employee theft, bad credit can risk the loss of a promotion, a raise or even a job.

 

5. Risk of relationship failure (Part 1). As people become aware of the importance of credit scores, more and more new couples are bringing up the topic of credit scores early in a relationship to help them see if the person they are getting together with is financially stable.

 

6. Risk of relationship failure (Part 2). Bad credit can also lead to relationship failures in other ways. When turned away from banks, people who need money may turn to friends and family to borrow money. Although convenient, this comes at a very high cost -- often, the end of the relationship.

7. Lack of mobility. When people are struggling with bad credit, mobility becomes an issue. You usually need a credit card to obtain airline tickets and rental cars. With bad or no credit, cars cannot be bought, and high-priced car repairs, fuel and car insurance may be out of reach. 

 

8. Lack of disposable income. When you are busy paying off old debt and maxed-out credit cards and paying higher interest and higher down payments, your disposable income is reduced. That means you can't enjoy the nice things you want to own.

 

9. Increased stress. Bad credit steals the enjoyment from life. You fear the telephone ringing because it might be a debt collector. You fear using your credit card because of the humiliation of it being declined. You go without because you don't have the money to buy the things you need.

 

10. Lack of life improvement. This one is among the most frustrating plagues of them all. Bad credit can keep you from making improvements in life. It might keep you from getting a job, or it might keep you from getting a car so you can get to your job, or it might keep you from going back to school to get retrained for a higher-paying job. Bad credit holds you back.

 

Bad credit is costly. It keeps you from enjoying life and it enslaves you to a debt cycle from which it can feel difficult to break free.

 

Fortunately, you don't have to be stuck in this rut forever. With a little willpower, you can make some simple, positive changes in your life to adopt new habits and turn your life around.

 

Bad credit costs you; good credit frees you. Check your credit reports at least three times a year -- you can get yours for free, one from each of the three major credit reporting agencies, annually from AnnualCreditReport.com. You can also check your credit-building progress for free once a month using Credit.com's Credit Report Card.

 

More on Credit.com and MSN Money:

 

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3Comments
Mar 26, 2013 6:37PM
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Why was this article written?  Nothing new here.  Why do I read them?  To make snide remarks, I am a grumpy old man.
Mar 27, 2013 7:03AM
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Excellent article on the misery of bad credit. Folks have been talking about these issues for years but nothing is really being done to stop those in the business of rating credit which can gut the finances of those that have a few bad breaks in life. Sure, it might be something you linger over a person for a period of time as a life teaching lesson, but this has evolved way beyond that.

On the other side of that, who has a worse credit history than Big Banks? Yet, they are getting bailed out on a yearly basis at nearly ZERO percents loans from the Fed/Government. That doesn't stop them from lending out that same money to you at 10-20 percent rates. They get to keep many Americans in this vicious cycle of bad credit misery while they(Big Banks) don't face any penalties for actually causing most of this misery.

Mar 26, 2013 7:51PM
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Most of this is true.  Some is not.  The article says "Bad credit is costly."  The truth is bad credit is a lot less costly than good credit if you borrow on good credit and refuse to borrow on bad credit.  Now, as for the 10 things listed, I might agree with all of them except number 9.  Bad credit would not cause any stress on me.  In fact, I can't tell you my credit score.  I pay my bills and will continue to do so as long as I possibly can.  Medical costs could ruin anyone's credit score.  Should that happen to me, I'll still go to the doctor and hospital as others do.  There is so much unfairness in this country where we don't discriminate that I don't even care what my credit score is.  I simply do not care.
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