A good credit score gives you access to premium credit cards, better loan products and more favorable interest rates.

But if you have a bad credit score — somewhere in the FICO range of 300 to 579 or VantageScore range of 300 to 600 — you’ll miss out on these deals and often pay much higher in interest on credit cards, loans and mortgages.

A bad credit score can make life difficult in a number of ways, and it can even delay retirement by costing you more money over time. But improving your credit score is about much more than luck, and it’s only possible if you understand just how much your credit score impacts your life.

Since banks like Citi, Bank of America and Discover have rigorous standards for determining who qualifies for lending, you might not qualify for traditional loans or credit cards when you have a bad credit score.

“The practical effect of having a poor credit score is that your access to mainstream funding is limited or nonexistent,” Ulzheimer tells CNBC Select.

But before you seek lending from less-than reputable sources like payday loans, pawn shops and title loan companies, Ulzheimer stresses the importance of reading the fine print.

Payday loans, for example, are an easy way to get fast cash if you’re in a bind, but they come with disclosures stating that the APR can be as high as 400% to 700%. These should be avoided if at all possible, explains Ulzheimer.

“If you’ve got a choice between a $10,000 personal loan from Wells Fargo or a loan from ‘Joe’s title loan,’ reading the disclosures and agreements will make it very obvious that the mainstream lender will give you a better deal — that’s just mathematics,” he says.

2. You pay more for your loan

Not only will a good credit score help you bank with more reputable institutions, but it also gives you the best interest rates on loans.

According to Ulzheimer, consumers get the best deals on APR for auto loans with a score of 720 or higher, and for mortgages, 750 or higher.

Let’s say you’re applying for a mortgage with a FICO score of 620. For a $300,000 house, you might pay about 4.8% in interest with the current rates, whereas a buyer with a score between 760 and 850 would borrow at roughly 3.2% APR.

A 1.6% difference sounds small, but in this case your lower credit score would increase your mortgage payment by about $275 per month — costing you $99,000 over a 30-year term.

Article : https://www.cnbc.com/select/side-effects-of-bad-credit/

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