How bad credit hurts you (and what you can do about it)

How bad credit hurts you (and what you can do about it)
(Image credit: Getty Images)

There’s no avoiding it - your credit is intertwined with many parts of your life. Having good credit can give you more access to financial products, lower your monthly bills, and make it easier to get a job. But through no fault of their own, many people wind up with poor credit after an emergency or life-disaster leaves them with bills they can’t afford. After taking a closer look at some of the most common ways poor credit can impact your life, we’ll explore a few steps you can take to improve and repair your credit, including using the best credit repair services

Five ways bad credit can hurt you

Credit impacts your finances, of course, but it’s important in all aspects of your money-life, even if you never want to take out a large loan or other financial aid.

1. It’s harder to qualify for a loan or credit card

Perhaps the most well-known reason for wanting good credit is that the better your credit, the more likely a creditor will approve you for a new account. If you want to buy a home or get one of the best auto loans, having good credit can be an important first step. Some loans have strict minimum credit score requirements, and the best credit cards are only available to those with good to excellent credit.

2. You may receive lower loan amounts and higher interest rates

Getting approved and getting a good offer can be very different. Some creditors work with people who have poor credit, but you may only be able to qualify for a high-rate loan. Or, you might get approved, but for a lower loan amount than you actually need.

Money loan dollars

(Image credit: Future)

3. You could pay more for insurance

In most states, insurance companies can review your credit reports and use a credit-based insurance score (along with other information) to determine your premiums. Having a good credit history can help you qualify for lower auto insurance, and homeowners insurance policies.

4. It can be harder to rent and move into a home

Landlords and property management companies will generally check your credit as part of a home rental application review. Some landlords will take a nuanced approach and only hold certain things against you, such as past evictions or non-medical late payments. Others may turn down all applicants who don’t have a minimum credit score. If you’re able to get a rental with poor credit, you may need to pay an extra security deposit for the rental, utility accounts, and internet service.

5. You may have difficulty finding a job or getting a promotion

While employers don’t have access to your credit scores, they may be able to receive (with your written permission) a copy of your credit history. The report won’t contain certain information, such as your date of birth, but employers may use it to help decide who to hire or promote. Having a good credit history can be particularly important if you’re looking for work within financial services or in a role related to finances or sensitive information. 

Piggy bank savings

(Image credit: Shutterstock)

How to repair your credit

Having poor credit isn’t a lifetime conviction - you can improve your credit over time. You can take a two-prong approach by finding ways to add positive information to your credit profile and correcting negative information that’s hurting your credit. 

1. Build good credit

Adding new, positive information to your credit history can help increase your credit scores and show creditors that you can responsibly manage credit. For people who are rebuilding their credit, opening a credit-builder loan or a secured credit card is often a good option. Creditors create these types of accounts for people with no or poor credit and it can be relatively easy to qualify.

When you take out a credit-builder loan, the money from the loan will be set aside in a savings account. Once you pay off the loan, you’ll receive all the money that was in the account. As a result, you could end the process with better credit and a savings fund.

Secured credit cards work like regular credit cards, but you have to send the credit card company a refundable security deposit. Your card’s limit will usually be the same as the security deposit amount, and the company can keep the deposit if you miss several credit card payments. You’ll get the deposit back if you close your account after paying off the balance.

With both options, make sure you pay your monthly bill on time or the late payments could hurt your credit even more. Also, with credit cards, try to only use the card for small purchases and then pay off the bill in full to avoid interest charges. Using a large portion of your credit limit can hurt your credit scores.

02. Review your credit reports for errors

The second prong involves closely reviewing your credit reports and disputing inaccurate negative information that’s hurting your credit. You can use one of the best credit report services for ongoing access to your reports. You may also want to order your free copy of each report from Equifax, Experian, and TransUnion online at

Federal law gives you the right to dispute inaccuracies in your credit report, and the credit bureau must investigate your dispute and either verify, correct, or delete the information. However, you also want to learn the rules of what’s allowed and not allowed on your credit report before starting.

For example, if you pay off a collection account, your credit report should be updated to reflect the fact that it’s paid, but it doesn’t necessarily need to be deleted. A paid collection account can stay on your credit report for up to seven and a half years from when the original account went delinquent. But if a creditor reports you late in July when you were late in June and brought your account current in July, you could dispute that error.

While you were late, your credit history should accurately reflect what happened. After sending a dispute, the bureau may correct the timeline, or, if it’s not able to verify the information with the original creditor within 30 days, it may have to delete the late payment from your credit history. Getting negative items corrected and deleted can help clean up and improve your credit history.

Credit Saint review

(Image credit: Credit Saint)

03. Hire a professional credit repair company

While you can likely find and dispute glaring errors on your own, you could also work with a credit repair service. These companies can use a trained-eye to closely review your credit reports and help advise you on which information may be disputable. They can also take on some of the legwork of monitoring your credit, sending disputes, and offer advice on how to effectively build positive credit. 

While some credit repair companies have rightfully earned a bad reputation, we’ve also found there are trustworthy companies that follow through for consumers. Our top pick, Credit Saint, has been in business for over 15 years, has an A+ rating with the BBB, and a rare 90-day guarantee. 

Credit repair companies can’t do anything that consumers can’t do on their own. However, they may have a better understanding of how the credit system and laws work, and can use this to your advantage. 

Go straight to Credit Saint

Go straight to Credit Saint
If you're worried about your credit, head over to Credit Saint, who will help you repair it. It's a trustworthy company, with reasonable fees and excellent customer service.

Top Ten Reviews Contributor

Where you see an article written by Top Ten Reviews Contributor, the author of this piece no longer works for the site or wishes to be identified as the author of the article. This is the general contributor profile, and differs from the Top Ten Reviews staff profile, as it denotes external writers.