Most people don’t realize the hidden costs of bad credit. Everyone recognizes how bad credit can affect an interest rate. Certainly, paying a higher interest rate for a short term loan or an auto loan can be a difficult proposition. But the true costs of bad credit are loan term, and they are enormous. Consider this: the different between a good and excellent credit score is about $60,000 over the course of one’s lifetime. The difference between a poor and excellent credit score is much larger: a whopping $200,000. By age 30, those with excellent credit scores are saving over $5,500 per year, and that number rises to about $6,300 at age 40. Extrapolated over a lifetime, those are massive savings which can mean the difference between buying a home, retiring early (or retiring at all), and passing money down to your children and grandchildren. The hidden costs of bad credit come through paying higher interest rates over long periods of time, which creates a sort of snowball effect. Having poor credit can keep you from purchasing the best products, it can keep you renting instead of buying (a serious issue when it comes to homes) and even from getting a good job, since almost all employers check the credit scores of their prospective hires these days.
For those with bad credit trying to open a business and take payments, there are plenty of online processors such as eMerchantBroker.com. Starting a business can be a risky proposition, especially when in debt. But it can also open up a new revenue stream that allows you to pay off your current debts and start taking control of your finances.
There’s also the traditional avenue for paying off debt, which includes budgeting and paying as much as possible towards your debts. This option isn’t rosy, but in the long term, it can pay off big time. You want to ensure that you’ll be able to get out from under your debt so that you can avoid the hidden costs of bad credit in the long term.