Not paying off your bills on time can hurt your credit score. Making a late payment on a car loan or mortgage payment can also have negative repercussions. Having a bad credit score can lead to many disadvantages when it comes to getting credit and loans.
Having a low credit score is considered one of the biggest threats to your financial well-being. It can stop you from getting approved for a loan or from finding a good job. When you want to start a business, you may have trouble finding an affordable business loan. This blog will help you learn how to get a small business loan with bad credit.
Top Disadvantages Of Having Bad Credit
#1 Loan Applications Get Denied
Poor credit is considered high risk by creditors and mortgage lenders. This means they won’t be inclined to approve loans for you. If you are looking to buy a home, get a car or start a business, bad credit may make it harder to find a lender willing to work with you. However, according to Lantern by SoFi, “Even with bad credit, it may be possible to secure startup business loans with no collateral that could help you with your launch without putting your personal assets on the line.”
#2 Interest Rates Will Be Higher
If you get approved for a loan, you’ll most likely end up with a high-interest rate. This is because banks typically charge high-interest rates for people with poor credit scores. They see low credit scores as a higher risk. The higher your interest rate is on a loan, the more money you will have to pay towards the principal through the loan term.
#3 Insurance Premiums Higher
Since insurance companies can check a person’s credit score, they might charge a higher premium if they find that the person has filed a few claims.
#4 Harder To Find Job
Many jobs require that candidates have a strong credit score. You may find some employers don’t want to hire people who have excessive amounts of debt or bankruptcies on their credit files.
#5 Difficulties Starting Business
Not only will a low credit score make it harder to find a job, but it might also be a challenge to start a business. Most entrepreneurs need the help of a bank loan to start a business, and most banks will be reluctant to offer a small business loan if your credit score is low.
#6 Difficult To Get An Apartment Lease
Even though landlords can check a prospective tenant’s credit history, they may not approve a lease if they have bad credit. This is because they believe that those with poor credit are more likely to be late on their monthly payments.
#7 Higher Utility Deposits
When you go to start an account with a utility company, your bad credit can make it difficult to get approved. They will assume you have trouble paying your bills and debts. If you do get approved for an account, you will most likely have to pay a higher deposit than someone with a better credit score.
#8 Less Favorable Rewards
If you have credit cards, you will get less favorable rewards on your purchases compared to having a good credit score. A good score can lead to introductory offers and incentives on certain types of purchases.
Your poor credit can affect everything from your job security to your home loan. It can also lead to higher interest rates and even cause you to lose your home. Because of this, it’s important to pay attention to your score and make moves to increase it. If you need a loan with bad credit, Lantern by SoFi can find you the best loan rates for your situation.