If you are a homeowner facing foreclosure, it may seem like there is no way out. You may be tempted to give up on the situation entirely and just do nothing, thinking, “this is my house, I’m not leaving.” But, it’s worth thinking through the side effects of a bad credit score that can result from a foreclosure.
Yes, you may have to give the house back to the bank or perhaps sell to another buyer, but the ability to protect your credit score is a big deal. Here’s a list of 10 side effects that can happen as a result of a bad credit score.
1. Credit and Loan Applications May Not Be Approved
Right now, it may be easy to apply and receive any kind of credit card you want. Once your credit score dips, you may find that your applications are being denied.
2. High Interest Rates on Cards and Loans
Lenders and creditors view customers with bad credit scores as riskier clients. To compensate, they will charge you higher interest rates. Over time, these high interest rates can cost you hundreds and thousands of dollars more than if you had a higher credit score and lower rate.
3. Difficulty Getting Approved for an Apartment
Ok, this one is scary. If you are facing foreclosure, than you are possibly risking losing your home. And if you get foreclosed on, this is going to give you a bad credit score. What you may not realize is that with a low credit score, this could cause you a very difficult time in getting in a new lease for an apartment. Landlords and property management companies check your credit when you apply, so if you have a low credit score, you may have a very difficult time finding an apartment to rent.
4. Security Deposits on Utilities
The hits just keep coming. Just like with landlords, utility companies will check your score. If they deem you a higher risk, they may charge you a security deposit just to turn the lights or water on.
5. Say Bye to your iPhone
Cell phone companies check credit scores too. If you have a bad credit score, you might not be able to land a cell phone contract. This may put you in the pre-paid phone services or have no phone at all.
As you can see, everything starts to be MORE expensive if your credit score is higher.
6. Impact on Job Applications
For certain jobs, employers will look at your credit score as well. Put yourself in their shoes. Would you hire someone who has a history of not being able to pay their bills? What does it say about your reliability? Your integrity? As harsh as it may seem, a bad credit score can keep you from getting a higher paid job.
7. Difficulty Purchasing a Car
With a higher credit score, it’s easier to buy a car and put it on a lease. Most Americans are used to paying down their transportation over time. But with a lower credit score, you may be forced to buy a less reliable car or not be able to get a loan altogether. This limits your ability to get around town and again, reduces your ability to make a higher income.
8. Higher Insurance Premiums
Just like the utilities companies and cell phone companies, insurance carriers will check your credit score as well. Regardless of your claims history, simply having a bad credit score could cause your premiums to be higher.
9. Call from Debt Collectors
Bad credit scores alone won’t cause calls from debt collectors, but unpaid bills will. Chances are if you have a lower score and everything else becomes more expensive, you’re going to be late on your payments.
What Is a Bad Credit Score?
So, what is considered a bad credit score? Although variations exist, here is a general credit score breakdown:
- Excellent/very good credit score: 700 to 850
- Good credit score: 680 to 699 (Average American score is 682)
- Average/OK credit score: 620 to 679
- Low credit score: 580 to 619
- Poor credit score: 500 to 579
- Bad credit score: 300 to 499
How Much Will a Foreclosure Hurt My Credit?
According to FICO, if your credit score is 680, a foreclosure will drop your credit score on average by 85 to 105 points. If your credit score is excellent at 780, a foreclosure will drop your score by 140 to 160 points.
Protect Your Credit
If you find yourself in a situation where you may be facing foreclosure in Northern Kentucky or Cincinnati, as painful as it may seem, you need to weigh the consequences.
Nobody wants to sell their home. We get that. But, we also know that sometimes selling your home to protect your score can save you hundreds and thousands of dollars in the long run. You can find a new place to live with a higher credit score, and you won’t get dinged with all of these extra expenses that come from a low credit score.
Remember, it can take 7 years to recover from a bad credit score. And, even longer when you consider the uphill climb you have in front of you.
If you are in a situation in Northern Kentucky and need to sell your home to avoid foreclosure, fill out our form or give us a call today. We will make an all cash offer and close fast to help you avoid foreclosure.