More and more in today’s economy, we hear of people and businesses alike getting behind on their loans and bills, and even having to default / go bankrupt. This obviously can be devastating for a person’s credit rating, report, and score.
Along with the psychological impact, there are some pretty detrimental material ramifications of having bad credit as well. Let’s walk through a couple of these common pitfalls today to see what sort of benefits can come from potentially repairing your credit.
1. Employment
Back in November of 2014, I started a new job after finishing graduate school. After going through the interview process and accepting the job offer, one of the final paperwork items I had to fill out was a release for the company to perform a background and credit search, if they desired.
Since most jobs in today’s society involve some sort of interaction with monetary / budget management, you can imagine that if an employer pulled your credit report and saw a bunch of overdue loan and bill payments and delinquent accounts, it just might jeopardize your job chances.
2. Mortgage Approval
On December 30th, 2014, my wife and I closed on a single family home purchase in Colorado. Prior to even really talking seriously with a real estate agent, the first step was that he connected us with a mortgage lender to secure home loan pre-approval. During this process, our ability and history to repay debts, credit card balances, and utility bills was scrutinized.
Along with the ability to actually secure a home loan in the first place, having bad credit history can drive up your interest rate and/or add mortgage origination points (to mitigate the bank’s risk), which can increase the cost of your home ownership.
3. Having Your Dream Business Flourish
Do you have a dream of owning your own business? If so, having bad credit can be a pitfall to this plan as well.
First, unless you are planning to open up a virtual business, most brick-and-mortar businesses require a fair amount of capital investment in the first phase of operation. If this capital investment exceeds the amount you can personally round up from friends, family, and investors, you will probably be looking at obtaining a business loan from a bank or grant from a small business association. Both of these routes will involve a thorough investigation of your credit history, and therefore, having bad credit can be quite detrimental.
Next, if certain contract businesses, clients can demand the right to perform a background check on you and your company. If this happens, you want to make sure your credit history is positive.
So there we have it – three fairly significant pitfalls of having bad credit. If you feel like any of these may be important to you, repairing your credit may be a very logical, important, and beneficial next step. Good luck!
***Photo courtesy of https://www.flickr.com/photos/jakerust/16610023059/in/
