A bad credit history can affect your financial future in several ways. You may pay high interest rates for many years because of low credit scores, especially if you never improve your credit rating. A poor credit history also can affect the type of job you can get, which could hamper the possibility of receiving higher salaries.
Delinquencies
One of biggest problems for people who have bad credit histories is that the negative information in their credit files remains there for several years, even if they have paid off bad debts. Delinquent payments to credit card companies that are at least 30 days late will be documented in credit files, and those delinquencies can stay in a consumer's file for seven years. Bankruptcies generally remain in credit files for 10 years.
Credit and Loans
An MSN Money article titled "Lifetime Cost of Bad Credit: $201,712" focuses on a scenario that shows how much more a person with a low credit score can pay for student loans, credit cards, auto loans and mortgages. As for credit cards, a person with a low score of 650 might only be able to get a card with an interest rate of nearly 20 percent. Someone with a good score of 750 may get a card with an interest rate of nearly 11 percent. According to the article, the higher rate could result in annual interest payments of $1,600, which would be almost twice what the person with the higher score would pay.
Employment
Some employers check job applicants' credit history when they make hiring decisions. Those employers may view credit history as a measure of responsible behavior and trustworthiness. People with a poor credit history can lose job offers, especially if a prospective job requires them to handle cash, employee payrolls, financial portfolios or expensive products such as jewelry.
Auto Insurance
Many auto insurers also examine credit histories to determine insurance rates, and drivers with bad credit histories often pay higher premiums. Auto insurers assert that research indicates people with low credit scores present higher risks because they're more likely to file insurance claims. In a USA Today article titled "Bad Credit Can Inflate Car Insurance Premiums," a spokeswoman for the National Consumer Law Center disputes such notions. She said people may have poor credit histories due to difficult times brought about by unemployment or serious illness, not high-risk driving.
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