If you are like most Americans, you have probably used credit at one time or another to buy a car or make some other major purchase and have a few credit cards in your wallet as well. However, if you are struggling with debt, the consequences could impact more than your credit score. The true cost of bad credit is not always obvious, and you may be surprised to discover it can have a negative effect on your health, your relationships, and your future financial status.
Having Bad Credit Is Stressful
When your credit score plunges and you are struggling with a mountain of debt as a result of overextending your credit line, it can cause a great deal of stress. The constant pressure of creditors calling because you are late on your payments, the knowledge that you have no way to obtain more credit when you might need it the most, and mounting late fees can all contribute to feelings of stress that can be overwhelming. Not only is stress mentally exhausting, it may also lead to dangerous physical problems that include high blood pressure, heart problems, and reduced immunity.
You May Be Denied Loans
Having bad credit can have an impact on your ability to secure loans when you want to buy a car, a home, or start a business. Most lenders will reject your application if you have a low credit score because they consider you a financial risk. While you may qualify if a friend or family member is willing to co-sign for you, securing a co-signer is not always easy and you may have no choice but to delay or cancel your future financial plans.
Even if you manage to secure a loan with your poor credit, the terms of that loan can have far-reaching effects on your finances. For example, if you are seeking at $10,000 loan to buy a quality used car and you have bad credit, a lender might offer you a line of credit with a higher interest rate or lock you into a long-term loan that may take you up to five years to pay off. Some lenders may require that you put down a substantial down payment on a car or home before a loan can be offered.
Bad Credit Can Damage Relationships
While you might be aware that bad credit can damage your financial well-being, what you may not know is how it can harm your relationships with loved ones and friends. Being unable to secure loans for a home or a car may put stress on your marriage, and having to ask family and friends for loans because you cannot get them anywhere else can test even the closest of ties. Arguments over co-signing for a loan or who is responsible for the payments can ruin a relationship forever and may even result in civil litigation.
If you want to get married and start a family, bad credit can put a damper on these plans and may cause your significant other to become frustrated. Paying for a wedding, renting an apartment, or buying a home might all prove to be difficult if you have bad credit. The longer bad credit forces you to put off wedding plans, the more damage it could cause to the relationship.
Bad credit can have far-reaching effects on your mental health as well as on your finances. When you are rejected for loans, cannot buy the things you need, or cannot pay your bills because of overwhelming debt, this can have a severe impact on your self-esteem. You may start to feel inadequate or experience feelings of failure. These feelings can lead to depression, which may only cause your negative feelings to intensify. All of this can harm your emotional and mental well-being and have long-term side effects that may eventually require medical intervention.
Decreased Employment Opportunities
Many of today’s employers consider your ability to repay debts a factor in how worthy of a hire you might be. As such, employers might pull your credit report as a part of a routine background check. While your experience and education might be impressive, having bad credit may make an employer hesitate and consider whether you might be a theft or embezzlement risk. This may seem surprising, but many companies consider taking such steps necessary to protect their bottom line and your credit score could mean the difference between getting hired and staying unemployed.
Increased Insurance Premiums
If you need to insure your vehicle or home and you have poor credit, you may end up paying higher premiums than someone with a favorable credit score. Many insurance providers consider payment history and your current credit score in how they calculate your payments, and bad credit may raise those payments, even if you have an excellent driving record or if your home has a variety of safety features that may make it less prone to fire or theft.
Having bad credit can put a severe crimp in getting a good night’s sleep. The thought of how many payments you have missed, loans you might not get approved for, and worrying about how to get out from under your personal debt may keep you up nights. As you lay awake night after night wondering, “How can I repair my credit,” the lost sleep can start to have a negative effect on your health. You may lose focus, experience weight gain and mood swings, and poor sleep may even interfere with your metabolism.
Bad Credit May Lead to Negative Behavior
When you have bad credit that closes doors of opportunity time and time again, you may turn to negative behaviors to ease your stress or help you temporarily forget your financial troubles. Behaviors such as smoking, drinking, or taking over-the-counter or prescription painkillers are not uncommon in those who deal with bad credit, but it is important to remember that repairing your credit is possible and may be easier than recovering from addiction, which can permanently damage your health.
Bad credit has a variety of negative effects that can impact your physical, emotional, and mental well-being. While the problem may seem insurmountable, there are ways to repair your credit and put yourself back on the road to financial stability and personal satisfaction.