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8 Ways Bad Credit Can Make Life Difficult

Allie Johnson

May 22, 2013

Bad credit? No problem! That ad slogan, commonly featured in everything from used car lot commercials to credit repair companies, couldn't be further from reality.

The truth is that a tanked credit score can cause big trouble in many areas of life, hindering your ability to land a job, find a place to live and even get a date.

Here are eight ways a shaky score can mess up your life — and worst-case-scenario tips for how to cope.

A low credit score can…

1. Make it harder to pay with plastic. Forget whipping out your AmEx Platinum when treating a friend to dinner, booking a hotel room or renting a car. If a low score keeps you from getting a credit card, using a debit card instead can be a hassle, especially when traveling. According to Thrifty car rental, most rental car companies will accept a debit card with a Visa or MasterCard logo, but they might limit your choice of cars to non-luxury models and put a hold of $200 or more on the funds in your bank account.

Hotels also sometimes preauthorize a certain amount on a debit card.

“They're basically freezing your own cash,” says Bruce McClary, director of media relations for ClearPoint Credit Counseling Solutions. “You could run out of money pretty quickly when you might not have expected to.”

So, what should you do? Consider a secured credit card. You'll have to deposit your own cash and often live with a low credit limit. But you'll have a card when you need it, and payments will be reported to credit bureaus, which helps rebuild your credit.

2. Cost you a job. Bad credit can be a vicious cycle: Have bad credit because you're unemployed? Go job hunting only to learn your prospective boss wants to look at your credit report. According to a March 2013 survey by the think tank Demos, one in seven people with problem credit have been told they didn't get a job because of their credit history. Many jobs require credit checks — from high-level executive positions to delivery driver, home care aide and frozen yogurt server jobs, according to Demos.

“They run the gamut,” McClary says, noting that employers might want you to have good credit if you're handling money, if you have access to customers' credit card numbers or if the position requires security clearance.

3. Limit where you can live. Need new digs? You might have a hard time finding an apartment if you have bad credit.

“Virtually all landlords will look into credit,” says Dick Burke, senior vice president and general manager for Apartments.com. That can include managers of a high-rise, luxury apartment complexes or even homeowners renting out their own houses, he says. Bad credit doesn't mean you'll automatically get turned down: A landlord might be more likely to rent to you if your bad credit resulted from a single catastrophe — an illness, a divorce or a death in the family — rather than from a history of late payments, Burke says.

So, what can you do?

“Be upfront and candid,” Burke recommends.

Explain to the landlord what happened and what you're doing to fix your credit, consider getting a letter of recommendation from a previous landlord or lender and be prepared to put down a deposit of four or more months' rent if you can afford to. Or, you might be able to get approved if you can get a creditworthy co-signer, Burke says.

4. Keep utilities off until you pay a deposit. So, you found a place to live. If you want to get your lights, gas and water turned on, it might cost you, says Howard Dvorkin, founder of Consolidated Credit Counseling Services. Utility companies may check your credit before starting service, and if it's bad they might ask you to pay a deposit that could range from $25 to $300 or more. Don't have the money? It might be time to call mom. Some utility companies will accept a letter of guarantee from someone who promises to pay your bill if you don't.

5. Prevent you from getting a cellphone contract. Cellphone carriers typically run your credit before signing you up for a contract, McClary says. But the recent expansion of cellphone options has been a boon to consumers with bad credit, McClary says. Instead of being shut out, they might actually get a better deal, he says.

“If somebody has train-wrecked credit, they can walk into a store and pull one of these pay-as-you-go phones off a shelf,” McClary says. “This could be one scenario where you actually save money.”

6. Make it more costly to buy a car. When you need a new car, you won't be able to just walk into a showroom, pick a ride and get a 0 percent financing deal. Instead, you'll have to make tough choices. Say you want to get a two-year loan to buy a $6,000 used car. If you have a bad FICO score, you might get 25 percent APR and pay up to $1,600 in interest — that's about $1,000 more than a consumer with a good score and a 9.8 percent interest rate would pay.

“The lower your credit score, the worse deal you're going to get,” McClary says. “And in some cases you're going to just get flat-out turned down.”

So, is there anything you can do? Shop around for the best deal you can get within the range of choices you have, McClary recommends. Scrutinize the fine print, crunch numbers and don't let dealers gloss over terms, such as high interest and fees, he says.

“Ask questions, be very vocal, and get things in writing,” McClary says.

7. Raise your insurance rates. When you apply for auto or home insurance, insurers typically check your credit and use it to determine whether to insure you, which policies to offer you and how much you pay, according to the nonprofit advocacy group United Policyholders.  Depending on the insurance company, a policyholder with bad credit could pay anywhere from two to four times the premium of someone with good credit.

8. Put a crimp in your love life. Bad credit can even mess up your shot at romance. Not only is it embarrassing when you go to, say, rent a car with a new flame and get told you have to rent a beige Corolla instead of a red Mercedes because you don't have a credit card. But some daters take good credit very seriously. In fact there's even a dating site, CreditScoreDating.com with the tagline, “Where good credit is sexy.” Users can include their credit scores in their profiles and search potential matches based on their credit scores.

So yes, bad credit can cause problems, but don't despair.

“People don't just wake up one day and have bad credit — something has to happen, whether it's illness, loss of job or poor money management,” Dvorkin says.

There is one way out, he says, and it takes time.

“You have to rebuild your credit,” he says.