How Bad Credit Hurts You – More companies are now using a credit report as a factor for new employment, insurance rates, and even deciding on what to charge for a utility deposit. Each person has a rating of a three-digit number between 300 and 850. The higher the number, the better a FICO score is.
Bad credit is a score of 675 or lower; and a score of 620 or lower will typically be classified as subprime.
People who apply for employment positions in retail will probably have their credit report reviewed by the potential employer. Any company that handles money, such as a bank or a store, will want to see how their employees manage their finances. Most people find this practice unfair and not relevant to the actual job, but it’s not against the law.
It’s very important to maintain a good credit rating for more reasons than you know. A good credit rating can also save you money with lower interest rates with a mortgage or credit card. If you have bad credit, don’t fret, most people do, but you can do something about it by paying off any outstanding debts.
Here are the five main credit score components and how much weight they carry:
Paying bills on time, every time (35 percent).
The amount of credit you’re using compared to the amount available (30 percent).
The length of time you’ve had credit (15 percent).
The length of time since you applied for credit (10 percent).
The types of credit you use, including revolving credit card accounts and installment loans like a mortgage (10 percent).
Because each debt is weighted differently, credit mistakes have different effects. For example, if you apply too frequently for new credit cards, you may lose only a few points. Missing a credit card payment will ding your score far more, says Weston.
The more mistakes you make, the lower your credit score will be and the more likely you will have bad credit. Bad credit, in turn, will make it harder for you to get a mortgage loan, a car loan or a student loan. It will also make it more difficult to get a credit card. If you do receive a loan or a credit card, bad credit means that you will likely have to pay a higher interest rate on the money you borrow.