Although you may be sure that having a low credit score includes spending higher interest on loans, do you fully get the implications? A higher interest rate on a large loan, such as a car loan, might cost you thousands of dollars more over the course of the loan’s life. There could be tens of thousands of rupees in difference in mortgage rates. Credit card interest rates are rising, making it nearly impossible to pay off the balance.
Of course, if you have bad credit, you may be unable to receive credit. Most creditors will not grant to high-risk borrowers, making it impossible for you to get the credit you need.
This can limit your alternatives, especially when it comes to big purchases like houses or cars.
Did you know that, in most circumstances, having a low credit score means you’ll have to pay extra for insurance? While bad credit does not always imply bad driving, it does appear to be associated with an increased risk of car accidents. Insurance companies use this to justify charging higher vehicle insurance rates to people with bad credit. In the long run, a low CIBIL score might be detrimental to your financial health. When you pay higher interest rates, you lose money that could have been utilized to build wealth. Not only do you lose the money you spend on higher interest, but you also lose out on the opportunity costs associated with it. To put it another way, you may have benefited from it. Retirement and other long-term financial goals may be postponed as a result of this.
Here are a few more drawbacks of having a poor credit score:
Refusal Of A Loan Or Credit Card:
Because creditors, particularly banks, do not want to take excessive risks, they will not lend money or issue credit cards to individuals or businesses with a poor CIBIL score. As a result, one of the most serious consequences of a poor CIBIL score is the high risk of loan or credit card application rejection.
High-Interest Rates:
A bad credit score reflects a person’s ability and willingness to repay a loan. As a result, banks and financial institutions are wary of approving loans or issuing credit cards in such situations due to the increased risk. The debtor, in turn, repays the lender through higher interest rates. Also, their options will be limited to bad credit loans, which while are helpful, would incur higher interest rates than regular ones
Getting a Mortgage Approval Will Be More Difficult
If you have bad credit, the landlord may be unwilling to give you a lease, preferring to give it to a tenant who has good credit. Landlords, like insurance companies and banks, assume that tenants with poor credit are more likely to default on monthly payments, exacerbating their financial situation.
It’s possible that you find difficulty in acquiring a job.
Many occupations, particularly in senior management or the financial business, have specific requirements that applicants must achieve, such as a high credit score. Because of your poor credit history, it may be more difficult for you to get the job you desire, especially if you owe large sums of money or have a background of insolvency.
It Can Be Hard to Start Your Own Enterprise.
With a bad credit score, not only will it be more difficult to get a job, but it may also be tough to start a business. To get started, many new firms require financial aid.
Even if your business idea is brilliant, if you have a poor credit score, banks are less likely to approve your loan application.
Last Thoughts
A bad credit score isn’t permanent. Changing your purchasing patterns, paying your bills on time, attempting to pay off debt, and routinely reviewing your credit card records are all excellent ways to break a poor credit score cycle. However, the most obvious strategy to boost your free CIBIL score is to use the best Credit Cards in India given by local banks.
