How Does a Bad Credit Rating Affect You?
Bank Loans, Mortgage Repayments, Renting a House & Mobile Contracts
Feb 11, 2009
Missing or late loan payments, loan defaults and CCJs result in varying degrees of bad credit or adverse credit. Although the effect isn't always immediate, it results in a high APR on bank loans, car loans and increased mortgage repayments. A bad credit rating affects many other aspects of life, such as the ability to work in certain professions and renting a house from a letting agency.
A Bad Credit Rating and High APR Bank Loans
Whilst those with good credit can get a bank loan at 8-9%, this isn't the case for those with a bad credit rating. Missed or late payments and loan defaults mean that a bad credit rating represents a huge risk to lenders. Those with bad credit ratings can expect to pay an APR of about 50-60% on bank loans.
Can Someone Still Get a Credit Card with a Bad Credit Rating?
Whilst good credit customers can get a credit card at an APR of 17.9%, those with a bad credit rating will find life more difficult. Bad credit history credit cards are fewer in number and they also charge a high APR of upwards of 35%. Those with very bad credit, as a result of personal bankruptcy, debt management plans or IVAs, may find that it is only possible to get pre-paid credit cards.
A Bad Credit Rating Will Mean Higher Mortgage Repayments
Individuals with a good credit rating will be able to get all the best mortgage deals. Sadly, those with a bad credit rating will be forced to choose from a more restricted range of deals. Any bad credit means a high APR and increased mortgage repayments. This will also apply to second charges, such as homeowner loans. It may be best to get the services of a mortgage broker so that they can trawl the market.
The Effects of a Bad Credit Rating when Renting a House from a Letting Agency
Bad credit can even be a problem for those renting a house. A letting agency always performs a credit check on those seeking to rent a house. Applicants with a bad credit rating will be rejected as they are deemed more likely to default on tenancy agreements and create problems for landlords. This means that renting a house is only normally possible directly from landlords.
A Bad Credit Rating and Mobile Contracts
Mobile contracts will not be available for those that have a bad credit rating. Anyone seeking a mobile contract will face a credit check. This means that people with a bad credit rating will only be able to get a pay-as-you-go phone and will often face higher call prices.
A bad credit rating results in a high APR on bank loans and home mortgages. It also leads to restrictions in other aspects of life, including the availability of mobile contracts and also when renting a house from a letting agency. It is worth knowing that a bad credit rating drops off a personal credit file after 6 years giving someone a fresh start.
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