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How Bad Credit Can Sabotage Your Everyday Life

By U.S. News & World Report

Most people understand the importance of good credit when applying for loans or credit cards. The better your credit, the more likely you are to be approved and earn better terms. But your credit matters, even if you don’t need to borrow money.

Having poor credit can hold consumers back from getting an apartment, a job, even a cellphone contract, and may increase the cost of car insurance and utility deposits. That’s bad enough, but according to a new NerdWallet survey, many Americans don’t realize the negative impact that bad credit can have on their everyday lives.

[See: 12 Simple Ways to Raise Your Credit Score.]

Landlords want to see good payment history. Payment history is the most important factor in a credit score, and on-time payments are very important to landlords. That’s why a potential landlord may check your credit, in addition to references from previous landlords, to make sure you’re in the habit of paying bills on time. But almost one-quarter of Americans don’t know that a person’s ability to rent an apartment can be negatively affected by bad credit.

Even with poor credit, you might still be able to rent an apartment with a co-signer or a large security deposit. But you might not be able to get your first choice, especially if other potential applicants have a stronger credit history. Improving your credit will help you compete in tough rental markets.

Some employers will check your credit. Potential employers won’t check your credit score, but they might check a modified version of your credit report. This is especially common for positions in government or involving finance. Employers check job applicants’ credit for clues that they might be irresponsible or in desperate need of money, which could make them a theft risk. Depending on the state you live in, pre-employment credit checks may be limited by law or even illegal.

A credit report doesn’t show the whole picture of your money management skills, and even the most responsible consumers can end up with blemishes on their credit reports. That said, since improving your credit may help you obtain a job in the future, it’s important to prioritize it.

[See: What to Do If You’ve Fallen (Way) Behind on Your Credit Card Payments.]

The latest cellphone is tougher to get. About half of Americans don’t know that a person’s options for cellphone service can be limited by bad credit. While it’s possible to get a cellphone with poor credit by paying a security deposit or joining a family plan, it may not be possible to get a regular plan by yourself if your credit is bad. Prepaid phones are a good option. But if you want a new iPhone or Android smartphone, you’ll probably have to pay for the phone in full and upfront since you’ll be locked out of the discounts and installment plans available to those with good credit.

Credit correlates with risk — and, therefore, car insurance rates. More than 2 in 5 Americans don’t know that the price of car insurance can be negatively affected by bad credit. There are credit-scoring models specifically designed to help auto insurers determine whether you’re risky. Consumers with bad credit are statistically more likely to make insurance claims, so insurers want to see the state of their finances to determine risk level and rates.

In some states, credit-based insurance scores are illegal. Rates there are based on your driving record and other personal information. But in states where these scores are legal, it’s likely your insurance company will check them, so improving your credit is crucial.

Bad credit may mean deposits on utilities. Consumers with good credit are less likely to have to pay a deposit to set up utility service. Like landlords, utility companies want to know that you’ll pay your bills on time. If your credit history shows otherwise, you may have to put up a security deposit. More than half of Americans don’t know that the cost of utility deposits can be negatively affected by bad credit.

[See: 12 Habits to Help You Take Control of Your Credit.]

How to improve your credit. The credit information that gets checked may vary based on who’s checking — an employer or car insurer versus a lender — but the most important elements are your payment history and debt load. So focus on paying every bill on time, every time, and paying down debt. For both of these, you need to get organized and free up cash in your budget.

Ensure that bills get paid on time by setting up automatic payments. To free up cash in your budget, you’ll need to make more money, spend less, or both, and divert the extra funds toward your bills.

Even if you never plan to apply for a loan, the negative effects that bad credit can have on your everyday life show the importance of healthy credit. Start building or improving your credit now, so it doesn’t get in the way of living your life later.

More from U.S. News

What to Do If You’ve Fallen (Way) Behind on Your Credit Card Payments

10 Completely Careless Credit Card Mistakes You’re Making

7 Signs Your Romantic Partner Is Financially Unstable

How Bad Credit Can Sabotage Your Everyday Life originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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