We’ve all heard the horror stories about having bad credit, but what about fair credit? Fair credit can seem unfair sometimes. Your credit is better than bad, but it isn’t good enough for lenders to compete vigorously for your business.
Let’s look at how fair credit can cost you time and money. We’ll also share a few tips on how to reduce the price you pay for having fair credit.
You Could Be Charged a Higher Interest Rate on Loans
Lenders will use your credit history to determine how much interest they should charge on a loan. If you have bad credit, they will either mitigate the risk by charging a high interest rate or refuse to do business with you altogether. If you have fair credit, you’re considered a moderate credit risk.
However, lenders have different thresholds for what is considered fair credit versus good or bad credit. If your credit score is less than 500, everyone says it is bad. If it is hovering just below 600, it may or may not count as bad credit. Some lenders will classify you as having fair credit. Is your credit score just below the golden 700 mark?
Some lenders will consider you to have good credit at 699, while others will classify you as having good credit if your score is over 650. This is why you should get a personal loan for fair credit score with Match Financial rather than letting your first choice lender treat you as a serious credit risk.
You can compare online personal loans for fair credit applicants that
won’t punish you for financial mistakes, especially if your credit is improving. Note that very few people have a credit score over 800 and almost no one has the perfect 850.
What if you are currently making payments on an existing loan? Your house payment and car payment won’t change if you’ve been making the same monthly payments on time every month.
However, the interest rate on your credit cards could go up. And if you want to refinance a loan, expect the interest rates you’re offered to be much higher than you would otherwise pay.
If you want to buy something on credit, you’ll need to put more money down in order to get the same interest rate as someone with good credit. For example, you may need to put an additional 10 to 20 percent down on furniture, electronics or a car in order to get the same low interest rate as someone with excellent credit.
You May Pay More for Your Insurance
Insurance companies will base the premiums on the risk you’ll file a claim. For example, the more you drive, the higher your auto insurance premiums. If you live in a dangerous area where cars are often burglarized, you’ll pay more in premiums, especially if you want the insurer to cover the damage caused by vandals or the theft of the vehicle.
The more expensive the property is, the higher the premiums, since it costs more to repair and to replace. However, lenders also use your credit score as a gauge of your financial responsibility.
If you’re late paying the rent or miss a credit card payment, they think this is proof that you’re irresponsible. Then they may raise your insurance premiums, whether or not you’ve paid the premiums on time or filed a claim.
You can lower the insurance premiums by absorbing more of the risk yourself. For example, raise the deductible. Then you won’t file a claim for a 250 dollar repair. Just make sure you save enough money in a savings account to pay for these small claims so you don’t have to borrow money to pay for repairs. If you have filed a claim recently, you could prevent the
insurer from jacking up the premiums by paying for the latest incident out of pocket.
The only exception is if you were in an accident of some sort. They’ll find out about it when a police report is filed or the other person files a claim. So pay for your own fender bender, but don’t expect to hide it if you got a DUI ticket.
It Can Impact Your Career
Companies may pull someone’s credit report as part of the background check process. If you have bad credit, don’t expect to be hired as a bank teller or financial advisor. You certainly won’t be allowed to get a government clearance, whether you’re in the military or applying
to work for a defense contractor.
If you have fair credit, they may not consider you for more sensitive positions. If you’re periodically late on your bills, they may be afraid you’ll learn government secrets and then sell the information for money.
What if you want to start your own business? Expect to self-fund it, saving up money and investing sweat equity, because few lenders will offer you a reasonable rate on a business loan.
It Can Be Harder to Find a Place to Live
If you have bad credit, it can be hard to find a landlord willing to rent an apartment or house to you. If you have fair credit, they may consider renting to you but mitigate the risk that you’ll be late on the rent by requiring a larger deposit. Or you’ll need a cosigner to qualify
for the standard one to two-month rental deposit.
Do you want to buy a house? You’ll pay more in interest and fees on a mortgage if you have fair credit. If you’re getting an apartment or house, you also need to sign up for utilities.
If you have fair credit, expect to put down a larger deposit to get the electricity, gas and water turned on. If your credit is very bad, you may need a cosigner to get the lights and heat turned on.
This is especially true if you missed or were late on utility payments.
Phone and internet companies are not legally required to do business with you at all. They could refuse to renew your phone contract, if your credit is bad and/or you missed phone payments. A prepaid phone plan may be the only way you can get a working cell phone.
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