The Disadvantages of Credit Ratings

Every resident in the United States needs to build credit if they plan to purchase a home, buy a car or rent an apartment. Good credit must be maintained by making payments on existing bills and loans in a timely manner. Failing to do so can lead to low credit ratings. The disadvantage of these credit ratings is that they often make it difficult to obtain necessary services in the future. While keeping a high score may be hard, it is important to do so to avoid being turned away from banks and financing companies when the help is needed most.

Credit Ratings Affect Future Loans

A disadvantage of credit ratings is how difficult they can make it to obtain a loan to purchase a home or vehicle. Banks and financing companies require good to excellent credit scores to lend money to individuals to make such purchases. The credit ratings also determine the annual percentage rate (APR) that is to be paid by the individual. If the person requesting the loan has a poor credit rating, he might be turned away from the bank or financing company, or given a high APR, which can lead to higher monthly payments.

Credit Ratings Affect Employment

Employers often run background checks on potential employees to ensure that they will not be a threat or liability to the company. Part of these background checks include viewing the potential employee's credit rating. Most job seekers are unaware of the effects that a credit rating can have on employment. Employers may feel concerned about individuals with low credit ratings, as financial troubles might affect job performances or distract from tasks that require special attention. However, if a potential employer makes the decision not to hire an individual do to low credit ratings, the applicant must be informed of it.

Credit Ratings Determine Living Situations

Individuals who are looking to rent an apartment or home within their community may find it difficult due to their credit ratings. Property managers and owners may turn away potential renters because they may have little or poor credit. These managers and owners, much like banks and financing companies, need to ensure that future tenants can pay their rent on time and in full. Individuals who have been turned away from renting can seek assistance from a friend or family member with a good credit rating to co-sign on the agreement.