Your credit score is used as a quick reference guide for anyone that is considering lending you money. It demonstrates your ability to pay back certain loans, and the higher your score the better.
Having a bad credit score isn’t the end of the world, but it may affect you in more ways than you think. You don’t want to be caught out financially, especially when you have a family to care for. So, let’s look at how a bad credit score may affect you so that you can be prepared.
Buying A House
Getting into the housing market is becoming more and more difficult as time moves on. It seems as if every new generation is labelled with the inability to own a home, yet people do seem to manage it somehow.
Buying a home involves two steps. You must first save up and put down a sizeable deposit, usually around 15% of the asking price, then prove that you can afford the upcoming mortgage payments. This is where a bad credit score can affect you.
A mortgage provider may turn you down for a house, even if you have saved up a respectable deposit. You may even struggle to move house in the future. Luckily, there are companies out there that specialise with refinancing with bad credit, such as Money Nest. If you are worried about refinancing a mortgage with bad credit you can find more information here. A money expert can help you with refinancing with bad credit, but you will be better off avoiding this situation altogether.
Buying A Car
Every family needs a vehicle to get around in, and it is difficult to keep one running for a long time. You will need to buy a new car when your current one fails, or your family begins to expand. Buying a car is a large financial decision, a payment that is difficult to complete in just one transaction. That is why many dealers will ask you to pay in instalments.
Unfortunately, a poor credit score may hinder your ability to buy a car this way. This means that you will have to choose a car from a less reputable dealer or save up for a long time to get the vehicle your family needs.
Student Loans
A student loan is necessary for most people to attend higher education. This loan will pay your university fees while also covering your cost of living until such a time you can pay it back.
The amount of money you receive from a student loan is based on several factors: your parents’ income. However, more mature students may struggle to receive adequate finance if their credit score is poor. A student loan is very different from a normal loan, and you aren’t normally expected to pay it back until you start earning a specific salary. Unfortunately, your poor credit score can deny you these funds in extreme circumstances, so make sure you check your credit before you take the next step in your education.
Phone Contracts
It can sometimes feel as if a new smartphone is released every month. These communication devices are extremely popular these days, and you may find that it is difficult to perform daily activities without one.
A smartphone is usually purchased through a contract that requires you to pay a set amount each month on top of any excess data or minutes you rack up in this time. As you have probably guessed by now, your credit score is going to affect this purchase. A bad credit score may prevent you from getting a specific rewards package or stop you from buying a smartphone contract altogether. This can greatly affect your kid’s ability to get a phone of their own too.
Credit Cards
Paying for your family’s needs gets quite expensive, which means that you may need to seek help from time to time. This help can come in many forms, one of which is a credit card system. This scheme allows you to obtain the things you need and then pay for the bill later when you are more able to afford it. Credit cards aren’t as prevalent in the UK as they are in other parts of the world, but they are still a useful tool in certain situations.
Unfortunately, credit card companies will only consider you for a card if you have good credit. What’s more, your credit score will deviate depending on how successful you are with the repayments. Therefore, you should only opt for a credit card if you feel that you can afford these repayments.
Summary
Daily life is always going to be full of bills, but you will have a much better time paying them off with a good credit score. Make sure that you are only paying for the things you need, and your credit score will reflect your wise financial choices. Only then can you go on to be more frivolous with your purchases.