Why Credit Matters - A Summary of the Effects of Bad Credit

We live in a very credit-driven society. Fifty years ago, people paid for almost everything in cash, and as a result, there was a lot less consumer spending. With the development of a more sophisticated financial system, spending has increased along with access to credit, which has fueled economic growth and lifted standards of living. Unfortunately, some people have been left behind - namely those with bad credit.

Bad Credit Puts Limits on Your Life

The United States is quickly becoming a cashless economy, and in today's world, a credit card is no longer a luxury - it's a necessity. While "charging it" was still relatively rare as recently as 10 or 15 years ago, now people routinely use plastic to pay for something as simple and inexpensive as a donut at a Krispy Kreme drive-thru. And it's not just a matter of convenience, as you need a credit card in order to rent a car, book a hotel room, get a cell phone, or even rent a DVD at some video stores. Clearly, you cannot be a full, participating member of American society without at least some access to credit, and if you have bad credit, that can be hard to come by.

Bad Credit Can Take Away Your Economic Freedom

Worst of all is the fact that people with bad credit normally don't have a credit card to fall back on in the case of an emergency. For example, a single mother who earns $250 a week cannot afford $400 for repairs when her car breaks down. Without repairing the car, she can't get to work and she will lose her job. If she had a credit card, she could charge the repairs, but since she made some mistakes when she was younger, she now has bad credit and no credit card company will give her a card. Therefore, the single mother has no choice but to use a "payday loan" company that charges astronomical interest rates, and she works all of the next week just to pay back the payday lender. Now she has no way of meeting her weekly expenses, so she has to take out another payday loan, and the cycle continues - she's essentially assigned herself to "debt slavery".

Additional Consequences of Bad Credit

Even if you're lucky enough to avoid falling into a cycle of debt like the one detailed above, bad credit has numerous unpleasant effects. Not only are you more likely to be denied for credit, but you're going to have to pay higher interest rates if you are accepted. The difference on a mortgage rate for someone with good credit and someone with bad credit can be as much as $4,000 a year in extra payments on a $100,000 house. Renting is often the only option for people with bad credit, and thus, they're shut out of the American Dream of homeownership.

Bad credit essentially relegates people to second-class citizenship - this statement is unfortunate, but true. If you have bad credit, you lack the freedom of people with good or average credit, and that's no way to go through life. The solution is to begin taking steps to improve your credit rating so that you will no longer be burdened with a 21st century scarlet letter. Debt Relief USA has numerous resources with which you can begin the process.

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