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Banking and Finance  » 5 Ways Poor Credit Scores Costs You Extra Money

5 Ways Poor Credit Scores Costs You Extra Money

Most of us want a good credit report to obtain automobile

financing, credit cards, and to purchase a home. But, beyond

these consumer loans, your credit report can cost you in

everyday living expenses. What you don't know about your credit

could be costing you money.

Having a credit card means that you can order tickets, rent a

car, and reserve hotel rooms. Besides these conveniences, your

credit report can mean that you must pay higher deposits and

fees for everyday services.

Did you know that your credit history can keep you from getting

utility connections, good telephone rates, the best auto

insurance, home owner's insurance, or even keep you from getting

hired?

1. Some utility companies set minimum standards for service

connections. If your report shows collection accounts for prior

utility bills, you may not be eligible for service at all. And

if utility companies do agree to connect your service, you'll

need to pay a higher deposit than another customer with good

credit who may not need to make any deposit.

2. The same requirements exist for telephone services. People

with a good credit history don't need to pay deposits for home

telephone or cell phone services. When we first got a cell phone

with poor credit scores, we had to pay a $300 deposit, for one

cell phone. After fixing our credit, we got eight cell phones

for our business, with zero deposits.

3. What many people don't realize is that good credit enables

them to get better insurance rates. High-quality, low-cost home

owners' insurance, auto, and life insurance companies set

minimum credit standards for their policy holders; this means

that consumers with poor credit have to pay more for less

coverage. Many automobile insurance companies now base your

monthly premiums on your credit score; these companies offer a

17% discount if your score is over 625 and a 25% discount if

your score is over 725. Why? Because according to their studies,

people who are careful with their credit are also careful with

their property and careful drivers.

4. Bad credit can cost you a job. More and more employers run an

applicant's credit report and hire the person with better

credit, assuming that better credit equals better integrity and

character. A friend of mine with a Master's Degree and a 4.0

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grade average did not get hired; she was told her credit score

didn't meet their minimum standard and that they hired another

person with less education.

5. Poor credit scores means you pay more for your home

financing. Mortgages cost more in upfront fees and interest

rates for those with low credit scores. How much can you save? A

mortgage loan of $150,000, 30-year, fixed-rate mortgage,

interest rate of about 5.72 percent costs around $870 a month;

poor credit scores raise the interest rate over 9 percent and

the payments over $1,200. As you see from these payment

differences, good credit means that you can finance a more

expensive house with the same income, or save $330 each month.

Boost your credit score so you can save money on everyday

expenses, get high-quality insurance, and the best mortgage

financing.

Copyright © 2006 Jeanette J. Fisher. All rights reserved.

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FREE Credit Help Teleseminar. Get expert advice on building your

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