Finances are difficult, aren't they? Then there's good and bad credit, good debts and bad debts, and even intricate equity transactions on a home that you and the bank each own half of. It's no surprise that the average household debt, excluding mortgages, is £8,000. As a cynic, it's simple to dismiss the terms as meaningless. However, the phrase "good credit" will be with you for the rest of your life, especially if you don't have any. Yes, you can secure a loan if your credit score is less than 550, but the interest rates are exorbitant. Here are some of the consequences of having terrible credit.

You’ll find getting a loan near impossible

Loan providers will not touch you with a ten-foot pole. The explanation is simple: they don't believe you'll repay the money. Bankers may be many things, but they are not foolish. Lenders play the game their way, and you must demonstrate to them that you are capable of doing the same. What will you do in the meantime if you need money?

You could look at an ECOA appraisal to see if there might be any other reason for your loan being denied. However if your credit is bad, it’s likely that the bank simply doesn’t trust your ability to pay them back.

You’ll make silly mistakes with your finances

The sole choice is to work with a broker, commonly known as a loan shark or a payday lender, to arrange a private loan. Now, the latter will appear to be a superior option, and this is because there is no threat of violence. Even so, the interest payments are exorbitant and impossible to keep up with if the loan is not paid back on time. Despite government regulation, the usual APR might be as high as 1,509 percent. All of this accomplishes is to increase your debt.

Forever stuck in that dead end job

This is due to a variety of factors. The first is that you are so deeply in debt that you cannot afford to miss a payment. One month without a stable paycheck is enough to plunge a household into a financial death spiral. This is unfathomable when you have a family to consider. Second, it's not as if you can start your own business. The creator of a startup requires funds to get started, and you will be unable to acquire investment due to your poor credit rating.

Things will be taken away from you

It's absurd to think that energy suppliers can do this, but they claim to somehow be loaning you one month's supply of gas and electricity. As a result, they, like a bank, want to see your credit record to assess if you're a sound investment. A low rating, on the other hand, may encourage British Gas to turn off the lights while you and your family are still inside the building. And it doesn't end there; the same is true with cable and phone bills.

When you need to borrow money, the lender will look at your credit report. That is why a good credit is essential.