How Bad Credit Makes Your Life Miserable

I am constantly surprised at how many among us don’t know or fully understand bad credit and how it can affect us all in our everyday lives. There are some who think that having and using credit is evil or dangerous and so they avoid it at all costs. In fact, there are people who have no credit rating at all who have never had a credit card or loan for anything in their life. Rare, but true, and those folks may wake up one day and find that was a really huge mistake.

Bad credit can make your life miserable in ways you probably haven't even thought of. Here are some ways credit affects you and how to improve it.

When it comes to credit, one of the biggest mistakes you can make is to underestimate how much your credit rating may affect you and your lifestyle. In many areas, besides the amount of money you can borrow when you really need to, and the interest rate you will have to pay, mismanaging your credit can affect whether you can qualify for loans for a mortgage, car, or personal loan. Having no credit history means a lender just doesn’t know if you are a good risk and probably won’t lend you money or will charge you a higher interest rate and offer a lower amount if they do.

The Effects of Student Loans

One area that people totally underestimate is the matter of student loans and their repayment. Would you believe that student loan debt in the United States today is over $1.3 trillion? Student loans are treated just like any other installment loan and if you aren’t paying them off on time or worse, you’re in default on a student loan, your credit rating will take a severe hit.

There is some good news here. If you are a younger person with little or no credit history, your credit rating and score can be established and actually will improve when you are paying off your student debt with on time payments. Whether you like it or not, your student loan debt may be the first account on your personal credit statement and it will affect you in some way.

How Your Bad Credit Can Make You Miserable

Be aware that having bad credit can affect your ability to gain employment, rent an apartment, or obtain life insurance. Overall, it can hurt your lifestyle in ways that you just aren’t prepared to deal with and can all be avoided if you establish and use your credit responsibly.

The three credit bureaus—Experian, Trans Union, and Equifax—all keep lifetime records of your credit or lack thereof and are regularly used by employers to see if you are the kind of employee that want to have. This is especially true in areas where security and money are involved like the military, law enforcement, accounting, and retailing. People with no credit or bad credit are thought to be tempted and more likely to be dishonest when around money and property because they haven’t shown good habits on their record. Fair or unfair, that’s the way it is treated.

Looking to lease an apartment? Landlords also use credit scores to screen their tenants. If you don’t pay your creditors, you’re less likely to pay your rent. What about insuring your car or truck? Yes, insurance companies use your credit score as one factor in determining your rates and lower scores mean higher premiums.

Credit Can Love You or Hate You, Which Would You Prefer?

Nearly 60% of Americans do not even know what their credit scores are. That’s a little bit like not knowing what the medicine you are taking each day is and does and just hoping for the best. Your financial health is described by your credit report and scores. You may not need your credit rating to get along today, but it will eventually be necessary if you are like the overwhelming majority of all Americans when it comes to buying or renting a home or car or seeking job opportunities.

You Don’t Have to Pay to Find Out About Your Credit

You can and should get your credit report and score and check it often. It costs nothing to do that since the passage of the Fair Act Credit Transactions Law in 2003 (FACT Act). You now can check your complete report at sites like Credit Karma or WalletHub as often as you like for free and it will never affect your ratings when you do.

Errors on Your Credit Report Can Hurt You

Like everything in life, mistakes can happen and if you check your credit report you can find and be able to fix the errors fairly quickly. Errors like not crediting your payments properly, accounts that are not yours, or other problems can be challenged at the three bureaus online and they must respond to you within 30 days by law. You can also check with your creditor directly to fix any error. If you don’t check it, you can’t fix it.

5 Cardinal Rules That Insure Good Credit

It’s pretty straightforward, but for some reason credit is very misunderstood. Having a good credit rating and report depends on several factors. Here’s the skinny on what you need to do:

  1. Pay your bills on time, period. Even missing one payment can lower your credit score and cost you money in penalties and interest.
  2. Pay down your debts each month. Your credit scores are affected by the amount of debt and the percentage of utilization of your available credit. Using more than 30% of your available credit lowers your score.
  3. Don’t max out any one credit card account. Spreading your debt among two or three credit cards is better as it keeps your utilization amount lower per card rather that at 100%.
  4. Your rating improves when you have both a history of revolving credit (credit cards) and loans (mortgages and personal loans, for example) on your record.
  5. Don’t close accounts when you are done using them. Having a long history on your record is good to have and keeping the available credit included in your utilization calculations helps your rating.

Credit is important and it should never be abused. I rarely carry a balance on any of my cards by paying them in full every month and that’s one of the main reasons that my FICO rating (my credit score) is always in the excellent category. That’s important to me.

Bad Credit Isn’t a Lifelong Sentence

The good news is that you can recover from bad credit, but it takes time and a change of your behaviors to do it. Credit can come to your aid and make things easier in life for sure, but it also opens the door to free and careless spending. Don’t let that happen to you!

How is your credit rating these days? Have you checked it lately? Have you even established credit as of yet? If you are married, do both of you have credit established? Do you use credit to your advantage or are you a non-believer?


  1. Emily @ JohnJaneDoe

    Jon’s credit is always better than mine by a few points, but both of us are in the excellent category. Not sure why, since it’s the same darn accounts. (Maybe it’s because I have a couple of store cards?) He tracks his with the free score from our credit union, but I track on Credit Karma.

    I will say having bad credit in my mid-20s may have been a bit of a blessing. I screwed up my credit early before it had too much impact, and while working my way into good credit wasn’t easy, it was way easier than it would have been later. I learned the lesson, and have been really careful with it since.

  2. Jax

    I have had good to excellent credit most of my adult life (thank you mom for putting me as a designating user on your credit card when I was young!) Lately it has been a roller coaster, though. I have financed house renovations using 0% balance transfer offers. I haven’t paid a cent of interest, but sometimes my utilization has been high. The good thing is that when I make a big payment, but credit goes up a couple dozen points!

    I’ve been able to leverage my good credit to turn our basement into a money making Airbnb enterprise. If I hadn’t had good credit, we never would have been able to undertake that renovation.

  3. My wife and I spot check our credit report. Just want to want sure nothing usually shows up. It’s something we are discussing with our kids now. With our twins, turning 18 early this year credit card applications have been rolling in. A great opportunity to review the basic principals of debt, credit etc.

  4. Common assumption is that bad credit just means you can’t get a good rate on a mortgage or a car loan, and the solution is to just not buy a house or a car—rent and take public transportation. Fine, let’s say that’s fair enough. But bill providers are still allowed to charge you a fee for having shitty credit, and when you try to rent an apartment or even get a job in some cases, your poor credit follows you around like a bad smell.

  5. That’s a good tip about spreading it out across cards! I would even say it’s worth it to pay the credit bureaus for your score if you have a major purchase coming up. Those free scores are good for a ball park, but I’ve found mine to be up to 75 points off, which can make a big difference in interest rates or even approval.

  6. Vickie@Vickie's Kitchen and Garden

    Some great points on credit. It is amazing how much credit affects everything. Even car insurance rates are affected. This is one area it pays to be on top of things early on in your life.

  7. Bad credit can destroy lives. I have a friend that couldn’t be on the mortgage with his wife b/c his credit was so terrible. That’s no way to start out life and on top of that the extra amount of interest that they needed to pay b/c of his bad credit definitely hurt them along the way. They ended up having to move to a cheaper part of the country away from family to rebuild everything. Definitely not the easiest thing they’ve ever done.

  8. Hey Gary. Thanks for the reminder on the importance of good credit. In my 10 years in the private sector, I saw several job candidates get passed over because of poor credit. Your habits tell a story. And in the era of big data, there’s no hiding.

  9. Thankfully credit doesn’t impact everyone. People who’ve achieved FI already aren’t impacted much.

    My credit score has dropped since we paid off 100% of our debts (including the house). Having a lower credit score hasn’t had any negative impact on us yet. I suppose if it goes low enough it could have a small impact on our insurance rates (I spoke with our agent about this). But otherwise – credit score, good or bad, hasn’t had any impact on us (thankfully!)

    1. I’m glad that you are in that situation, Brad. A lot of people who are very well-off financially still use their credit to finance new capital ventures. It seems that some of today’s financial independent people are trying to anticipate future financial needs and thus want their credit scores to help them with that goal. Thank you so much for your comments.

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