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Why Does Bad Credit Matter?


Having a bad credit score can be stressful, as it will have an impact on parts of both your personal and professional life. Over 16% of Americans have a bad credit score, which means over 48 million citizens are deemed to have a poor credit score rating by the FICO (Fair Isaac Corporation).  Bad credit however can have a seriously negative impact on your ability to borrow money online, access credit and even get a cell phone contract.

Your credit score is an indication to lenders and credit providers of how creditworthy or unworthy you are for them to lend you money or provide you with a line of credit. If you have a bad or very bad credit rating, your chances of getting any loans or credit will be reduced. However, there are bad credit loan options around and some lenders will still consider people with bad credit, although they may be charged more to borrow money, having been deemed a greater risk.

Let’s explore why having a bad credit score matters, and what you can do to improve your credit score and better your chances of future jobs, loans and much more! 

What Is Bad Credit?

‘Bad credit’ refers to having a bad credit score, which is a numerical figure representing an individual’s creditworthiness. People gain a credit score through paying for different lines of credit, such as credit cards and loans. The better you are at repaying loans and meeting other financial obligations, the better your credit score is likely to be.

A credit score is measured between 300 and 850, with a good credit score typically falling above 690. Conversely, a poor credit score is subjective but typically falls within the range of 300 to 629. 

Having a bad credit score, though not permanent in most cases if an individual takes steps to improve it, can have a serious impact on an individual’s life, by limiting their options of finding a creditor and lenders for anything from a mortgage to a car finance contract. Applying for loans, jobs, properties and much more will be more difficult if you have a bad credit score. 

What Causes Bad Credit?

Bad credit is caused by poor financial habits and bad credit practices. For example, if a person has a credit card, maxes out the limit and does not repay the money back alongside interest accordingly then they will begin to worsen their credit score. Similarly, people that borrow loans and avoid or miss payments will also worsen their credit rating. 

Other bad financial and credit habits will also worsen an individual’s credit score over time, such as through applying for too many loans you aren’t eligible for (and subsequently being rejected for them), declaring bankruptcy, being a victim of identity theft and much more. Therefore, it is important to take the necessary steps to keep your credit score intact and wherever possible, you should take steps and actions to actively improve your credit score, helping to move it up and into the good or excellent range.

Being able to budget properly when it comes to your day to day spending habits can also go a long way in helping you maintain or build a better credit score.

Finding yourself with bad credit can be very stressful and can make it harder to find credit

What Are the Effects of Having Bad Credit?

Although having bad credit won’t always mean you can’t access any finance, loans or credit options, having poor credit or bad credit will reduce your chances of acceptance for loans and credit and the number of options available to you will also diminish. In cases where someone with bad credit who needs to borrow money instantly applies for a loan, it may take longer for the lender to make their decision as they may request further documentation and they may carry out additional checks dur to the applicant’s bad credit history.

Having a bad credit score will affect your likelihood of being accepted for:

  • Jobs
  • Rental properties
  • Mortgages 
  • Personal loans 
  • Credit cards 
  • Security deposits on utilities 
  • Cell phone contracts 

Not only will you face much more rejection by having a bad credit score, but you will also limit yourself financially. For example, having bad credit score could mean:

  • You’re only accepted for loans with higher (and possibly unmanageable) interest rates 
  • You can’t start a new business 
  • You can only borrow smaller loan amounts (like $100 or $600 loans)
  • You’re only offered higher insurance premiums 
  • You face difficulty purchasing large items e.g. cars, houses, household items 

Having a bad credit score suggests that you are possibly irresponsible and unable to handle your finances and therefore not the best candidate when it comes to handling and managing money and finances, which will include everything from employment to medical insurance and even credit cards.  

Having bad credit is always something to void at all costs, as it can cause a lot of personal and financial stress, limiting you in your everyday life. It can cause strains on your relationships, whether that be with a partner or friend, and even cause your wellbeing to worsen. Hence, it is important to try and improve a bad credit score as soon as you can.

Can I Get a Loan With Bad Credit?

Yes, you can still get a loan with bad credit. However, many loans offered to those with bad credit may come with higher interest fees. For many individuals, having a bad credit score can be infuriating as it limits them in terms of debt. For instance, if you have a bad credit rating and apply for a loan, whether that be a payday loan, installment loan or perhaps an emergency loan, you will likely be given a higher interest fee than other applicants. As a consequence, you may find it difficult to repay the loan and then spiral into further debt. 

On the other hand, taking out a loan whilst having bad credit can be the chance you need to rebuild your credit score. You can improve a credit score through repaying the loan with interest, on time or even early if possible, according to the contract set out by you and the direct lender. However, you must be able to afford the loan in the first place.

Nevertheless, bad credit loans do exist for those with bad credit, but these aren’t suitable for all individuals as they can too be offered at high and unfair interest rates by some companies online. So, always be sure to shop around if it is a must that you use a bad credit loan and always use a reputable company for bad credit loans. 

Can I Fix a Bad Credit Score? 

Having a bad credit score, though stressful, is not the end of the world. Individuals can fix bad and even very bad credit scores through following some simple steps and adjusting their personal and financial habits. 

Although it will always take time; in some instances, many years to clear and reverse the effects of a bad credit score, it is possible and is also advisable. Ways in which you can help improve your credit score for the future include:

  • Close old accounts 
  • Pay back money on time 
  • Only apply for loans you can afford 
  • Avoid applying for several loans at once 
  • Maintain a long credit score
  • Start a line of credit as soon as you can (e.g. when you are of legal age, take out a credit card and set up payments each month) 
  • Set up automatic credit card repayments 
  • Avoid getting close to your credit card limit 
  • Only buy necessary items on your credit card 
  • Use alternative money borrowing options to loans 

There are also other ways you can improve your credit score, however, by starting with the above it will help you get back on track to a good credit score. Having bad credit is never advised, and it is important to begin fixing it as soon as you can to better your chances of loans, jobs and much more in the future.