What Are the Real Ramifications Of Bad Credit?

Thu, Aug 12, 2010

Financial Advice

The high unemployment rate and foreclosure crisis are serving to hurt the credit scores of millions of Americans. Your credit score is a guage of how lenders view you as a credit risk, and traditionally bad credit was akin to the scarlet letter as illustrated by Nathaniel Hawthorne. However, with so many Americans suffering foreclosures and/or delinquencies, this is no longer the case. Experts predict that many lenders will have to conform to new realities and not hold past mistakes against consumers to the degree that they historically have. Derogatory credit events most usually stay on your credit report for seven years — so your worst case scenario is having to live with it for that period of time.

Adverse consequences which could arise from having a bad credit score include the inability to receive credit. However, many lenders now offer credit cards, auto loans and even mortgages to those with a poor credit score. The downside is that the terms offered to those without good credit entail higher interest rates and fees. Once your credit improves, it is then possible to refinance these “bad credit loans” into ones with more reasonable interest rates. The bottom line is that having a bad credit score can hurt in some scenarios — but it is not the end of the world. As more and more consumers fall into hard times, having a period of difficulty on your credit report will not entail the stigma that it once did.

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