Credit MD Online - Bad Credit

How does bad credit rating affect me?
Bad credit is a negative rating that is given by the credit rating agencies; if you miss or default on your monthly payments (for more than a month), a bad credit label can appear in your credit report.

So a bad credit rating means a low credit score. A low credit score or a bad credit history can severely affect your finances. The first and the foremost problem is that you will be denied credit – a poor credit score makes you a high risk-borrower and thus it is probable that the creditors might refuse you any loans.

In situations, even if you are granted credit by the lenders, you might end up paying an extremely high rate of interest. These loans are termed as ‘sub-prime loans’. Though they come with a very high interest rate, they also help you to consolidate the debt and pay off some loans.

So financially bad credit can affect you in the following ways –
• You are denied a low-interest loan
• You cant buy a house or an apartment
• You end up spending paying very high rate of interest

Nevertheless, there is more to it. Besides, financially, bad credit can also cost you a job. Surprised! Many employers (including the federal government), regularly scrutinize the credit reports of their employees (both current and prospective) to decide who can be hired and who can be fired.

A study conducted by the Society for Human Resource Management has shown a clear indication that such credit checks has dramatically improved – in 1996 only 19% of the companies did such checks, the number shot up to 35% last year.
However, experts argue that the employers are more interested in other background checks like identity verification and criminal records rather than credit information.

In the private sectors, the credit report of current and prospective employees, dealing with finances, cash or other valuables are usually reviewed. These include –
• Chief Financial Officers or CFOs of organizations
• Bank tellers
• Controllers
• Employees who work for brokerage institutions and financial institutions
• Employees in the business of jewelry manufacture

According to the Fair Credit Reporting Act, an employer needs a written permission from the employee if he wants to do a background check by a third party. Besides, if the credit information is used to deny an applicant of a job, fire an employee, annul a job offer or cancel a promotion, the employer needs to do two things:
► Provide the employee with a copy of the report along with an explanation of the FCRA rights, before the “adverse action” is actually taken
► After the action is taken, the employee must be told about the company that provided the credit information and its contact details, so that the worker can dispute in case there are any inaccuracies.

Bad credit has other disadvantages:
It affects your privacy:
Imagine getting calls everyday; at times even multiple times in a day; leaving rude messages and even threatening you. Moreover, calls being made to your friends, relatives and even colleagues and trying to gather information about you. This is exactly what happens when credit lenders try to get back their money. This is an extremely embarrassing and frustrating situation when you have explain to your all those people what is the reason for the persistent calls.

It also affects your relation with the ones for whom you care:
Mind you, a bad credit rating can also affect your relationships with people. Think of this! Would you like to rely on someone who first borrows money and then avoids the creditors when it comes to paying them back? Money is the root cause of most of the problems and they are also the source of most problems in relationships. 

Improve Credit Rating Now...