What is a bad credit score? | Investment
• Higher interest rates. In general, having a lower credit score means that lenders will charge higher interest rates to offset the risk. If you are approved for a loan with a high interest rate, it can dramatically increase your borrowing costs.
• Fail to meet a lender’s credit score requirements. If your score is too low, you may not meet a lender’s minimum credit score requirements. For example, lenders typically do not approve borrowers with a FICO score below 580, unless they have a co-signer. Additionally, some lenders only approve borrowers who have excellent credit scores.
• The location of an apartment. When you try to rent an apartment, the landlord may charge you a higher deposit. In addition, some landlords may require you to prepay the first and last month’s rent.
• Apply for a mortgage. Bad credit often results in a larger down payment to qualify for a mortgage. For example, a Federal Housing Administration (FHA) loan allows you to deposit 3.5% if your credit score is at least 580. If it is below that threshold, you may still be eligible, but the your deposit amount increases to 10%.
• Apply for a car loan. If you need to apply for a car loan, it can be difficult to get the financing you need. As with a mortgage, lenders may require a larger down payment. And although some auto lenders may advertise loans without credit check, we do not recommend them because they incur exorbitant fees.