Turned Down For Financing?
The hard truth is that if your credit score is less than what your lender considers to be an adequate risk, you can be turned down for a loan. As each lender is different and uses different criteria on which to base lending decisions, there is no hard and fast rule as to the minimum credit score you need to qualify for each type of loan. However, the general rule says that a FICO Score of less than 650 is considered a risk.
Depending on your actual credit score and a variety of factors unique to each lender, you may find trouble in buying a home, buying a car or even making other major purchases such as furniture and electronics.
Although there are many other reasons for being denied a new credit card, a poor credit rating is usually a determining factor. In fact, is quite common for people to first learn of their poor credit by being turned down for a credit card. The situation is made worse by excessive credit card applications showing up as inquiries on your credit report. Too many inquiries by credit card or other lending companies can also ding your credit rating. Some may argue that using credit cards when you already have bad credit is not a good idea. This is definitely true. However, using credit cards responsibly—not using more than 35% of the credit limit and making all payments on time—can actually increase your credit score.
Higher Interest Rates
The fact remains, the lower your credit score, the higher your interest rate. This includes mortgages, auto loans, personal loans and credit cards. You also may be subject to increased insurance premiums, utility costs, or rent for an apartment. As the American economy improves, the general population is extended more credit and tends to spend more. In the face of higher gas prices, war, and lowering employment rates, we see more and more people with not only increased debt, but without the resources for paying off this debt.
On one side, more and more lenders have become more and more forgiving of individuals with bad credit by offering “sub-prime” credit card and loan products. This practice provides a means for those with bad credit to still get credit—at a premium cost. Sub-prime loans and credit cards often have interest rates that are much, much higher than that of “prime” loans and cards. Additionally, extra fees are often imposed for providing this service.
Unable To Rent
Today, landlords are advised to check a series of consumer reports before renting an apartment or retail office space to prospective tenants, including reports from tenant screening services that detail rental history, adverse actions (evictions, denials of leases, co-lessee requirements, etc.), and credit report history. All of this information is designed to demonstrate the likelihood the tenant is to default or be late on their rent.
If these reports show red flags, coupled with a bad credit rating, you could be subject to higher rent amounts, higher deposits, or even be denied the lease altogether. If you are turned down, requested to include a co-signer, or asked to pay a higher rent or deposit, the landlord must inform you of this adverse action, the reason for the action, and the credit reporting agency that supplied the report.
Life happens and because of unforeseen events, your credit can be damaged. Get Credit Healthy is here to guide you back to credit health.