7 Nasty Ways in Which a Low Credit Score Is Costing You Money

Whether it’s absent-mindedly leaving your wallet in the park or your favorite stock plunging to an all-time low, no one likes a situation where they end up losing money. Nevertheless, if your credit is in bad shape, you may be doing just that - pouring oodles of hard-earned dollars down the drain. You probably don’t realize it, but a low score could be costing you money in various ways.

1. High Interest Rates: A low score means that prospective lenders look upon you as a credit risk. To compensate, they may charge you higher interest rates. In many cases, just a 10 point improvement in your score can significantly lower the amount of interest that you’re asked to pay on your mortgage, auto loan or even your credit card balance!

2. Unfavorable Terms: Since lenders are wary of doing business with individuals who have poor credit, they may incorporate unfavorable terms into their agreement. Let’s say you want to buy a television but are unable to obtain regular financing. Although you may eventually locate a shop owner who’s willing to sell you the item in return for weekly installment payments, it’s quite likely that he’ll charge you several times its value.

3. Credit Card Rewards: Most credit cards offer reward programs through which you can get back a portion of the money that you’ve spent, or obtain travel miles and other great deals. However, in order to qualify for these programs, you need to have good credit. 

4. Insurance Premiums: Insurance means protection against losses. Naturally, the more careful and conscientious you appear to be, the lesser is the insurance that you are likely to be charged. And how does the insurer gauge this? By your credit score of course! 

5. Job Opportunities: Almost 50% of all employers ask applicants for permission to scan their credit report in order to determine how responsible they are. Thus, poor credit could in some cases keep you from getting that coveted job, or even a much-needed raise. 

6. Lack of Savings: A sure-shot way of lowering your credit score is not paying your bills on time. Doing so will additionally result in late fees, leaving you with very little money (and savings) at the end of the month. 

7. Inability to Grow Wealth: Whether you have a job or manage your own business if you want to grow your wealth, you have to invest systematically in profitable opportunities. However, if most of your income is eaten away by steep interest charges, late fees, and high insurance premiums, it is unlikely that you’ll save enough money to put in wealth-growing instruments such as stocks or bonds on a regular basis.

Losing your hard-earned money through mismanagement of funds can trap you in a vicious circle. It may lead to a poor credit score which in turn can cost you more of your wealth. A low credit score is especially a problem if you’re looking for funds to buy a home or grow your business. Instead of building your dreams, you’d actually be demolishing them if you had to borrow money at high interest rates.

The best way out of this conundrum is by making a dedicated effort towards improving your credit score. Try paying your bills on time and gradually reducing your debt levels. This way you can once again climb back into the good books of lenders. And once you have an excellent score, you can even get banks and financial institutions to lend to you at no cost whatsoever!

At Fund&Grow itself, we help clients with good credit obtain $50,000 - $250,000 of unsecured credit at 0% interest. All they have to do is call us, and we take care of the rest.