The Update

The Cost Of Poor Credit

Your credit score plays a powerful role in your financial life, often in ways people don’t fully realize until they are affected by it. While it may seem like just a number, poor credit can carry significant costs that extend far beyond being denied a loan. From higher interest rates to limited opportunities, the long-term impact of poor credit can be expensive and stressful.

Higher Rates

One of the most immediate costs of poor credit is paying more for borrowed money. Individuals with low credit scores are often offered loans and credit cards with much higher interest rates. Over time, these higher rates can add up to thousands of extra dollars in interest for car loans, personal loans, or credit cards. In some cases, borrowers with poor credit may only qualify for predatory or subprime lending options, which can trap them in a cycle of debt that becomes increasingly difficult to escape.

Housing

Poor credit can also affect your ability to secure housing. Many landlords review credit reports as part of the rental application process. A low credit score may lead to a denied application, higher security deposits, or the need for a co-signer. For those looking to buy a home, poor credit can result in higher mortgage rates or disqualification altogether, delaying homeownership and increasing long-term housing costs.

Insurance Premiums

Another hidden cost of poor credit is higher insurance premiums. Many insurance companies use credit-based insurance scores when determining rates for auto and homeowners insurance. Studies have shown that individuals with poor credit often pay significantly more for coverage, even if they have a clean driving or claims history. This means poor credit can cost you more each month without you even realizing why.

Employment

Employment opportunities can also be impacted by poor credit. While employers typically do not review credit scores, some may review credit reports—especially for positions that involve financial responsibility. Negative marks such as unpaid collections or excessive debt could raise concerns for employers, potentially limiting job prospects or career advancement.

Mental & Emotional

Beyond the financial consequences, poor credit can take an emotional toll. Constantly worrying about bills, being denied credit, or struggling to make ends meet can cause stress, anxiety, and feelings of frustration. This stress can affect relationships, mental health, and overall quality of life.

The good news is that credit can be improved over time. Making on-time payments, reducing debt, reviewing credit reports for errors, and seeking financial guidance can help rebuild credit and lower these long-term costs. Improving your credit is not just about qualifying for loans—it’s about gaining financial freedom, saving money, and creating more opportunities for the future.

Understanding the true cost of poor credit is the first step toward taking control of your financial well-being.

Free Financial Coaching

Do you want to learn more about finances, budgeting, good credit, and more? RGCU offers free financial coaching. Our certified coaches can help better understand where you're at with your finances, and give you tips.