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What can bad credit stop you from doing?

Having bad credit could restrict your choices when it comes to borrowing. Find out more about what could be affecting your plans.

We all need to plan for our financial future, but a bad credit score could hamper many of your saving and spending goals.

If you’re looking to make a big purchase like a car or investing in expensive home improvements, a loan can help you achieve your plans quicker.

However, if you have bad credit, you may struggle to be accepted for a loan with reasonable rates – or at all. You may not know what your current credit rating is or how credit scores work, but having bad credit can negatively affect your financial future. That’s why it’s important to know what might stand in your way.

Credit checks

Whenever you apply for a loan, the lender will perform a credit check to help decide whether to accept or reject your application. Lenders check your credit score to analyse your reliability as a borrower and assess your ability to meet the repayment agreements.

Depending on the loan type, lenders will perform either a hard or soft credit check:

In many cases, if you have poor credit your loan application could be denied. You may be granted a loan, but the interest rates will likely be higher in light of your adverse credit score, meaning more money goes to the lender rather than on repaying the balance. Having bad credit can affect your chances of a loan, but it can also impact aspects of your lifestyle.

What does having a bad credit score mean for your finances?

Here are some of the consequences a bad credit score can have on your financial situation and lifestyle:

You’re only offered higher rates on loans

When you have poor credit, lenders view you as a high-risk borrower. This is because in their eyes you are less likely to meet the repayment terms, based on your borrowing history. Lenders tend to make their loans more expensive for those with bad credit by increasing the interest rates.

If your loan application is accepted and you pay it back as agreed, it will help improve your credit score. However, you’ll pay more on the loan overall.

Loan applications are rejected outright

In many cases, those with bad credit are often flat out refused a loan because they are not deemed to be financially reliable. Being turned down for a loan can be stressful if, for example, you have urgent repairs to make at home.  

You may be refused a mobile phone contract

If you have a bad credit rating, you might struggle to secure a new mobile phone contract, which means it’ll be more difficult to afford a new upgrade or replacement if you’ve damaged your smartphone.

Mobile phone providers normally carry out a credit check before formally agreeing to the contract type and price you’re applying for. With bad credit, there’s a chance you won’t be accepted for the one you want.

You may be refused finance on a car

Like mobile phone providers, car dealers will check your credit rating before accepting your application and may turn you down if you have bad credit. If you do manage to acquire a loan, it will more than likely be at a higher rate.

You might not be approved to rent a home

Having bad credit can even impact on your living arrangements. Landlords typically check your credit file when you apply to rent, to assess whether you’d be able to make repayments. If your credit history shows evidence of missed or late payments, your application could be rejected.

Banks may refuse an arranged overdraft

Regular use of your bank’s overdraft is something that banks consider if you’re looking to switch. Frequent use of your overdraft won’t impact your credit score provided you are showing you can repay the money.

Should you regularly go into your overdraft without paying your way back out, banks will notice this. They may charge you a higher rate on their available overdrafts or refuse it outright.

You can’t secure a business loan with bad credit

Your personal finances could affect plans to start a new business. Many start-ups often need the financial aid of a loan to hit the ground running, but bad credit could stop you at the first hurdle.

While your personal and professional finances may seem separate to you, lenders look closely at all your credit history before offering a loan to boost your business. This can be difficult, as it could result in a missed opportunity to improve your career and way of life.

Saving for the future will take longer

It’s clear that acquiring a loan with poor credit is possible, but these loans often come hand-in-hand with high interest rates. If you’re trying to save money for the future so you can buy a house, car, or for much-needed home improvements, these interest rates will slow things down.

With a good credit rating, you could save money on interest rates, which can be put aside for something else. With bad credit, you’re paying more each month and missing out on opportunities by delaying your financial future.

Benefits of improving your credit score

While having bad credit can certainly affect your borrowing abilities and future plans, it is possible to improve your credit score. With a healthy credit report, you will be more likely to be accepted for loans at a lower interest rate and put the money you’ve saved towards something important to you.

More on credit ratings

You can find more information about credit ratings on our Know How blog.


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