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Here is how your credit score affects your financial future

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A lot of people do not realise that using credit irresponsibly can have a massive effect on their future. This is because their irresponsibility often leads to overdrafts on their credit cards, high credit card bills, delayed monthly payments, loan and debt defaults, all of which can impact a credit score. Having a low score shows that you are struggling or something has gone wrong, while a higher score shows you are on a bright financial path. Your credit score affects a lot of areas in your life and can impact your financial features in the following ways.

It can affect your employment eligibility

Some employers will ask credit agencies for your credit report before hiring you. Although they might not be able to see your credit score, the credit report will tell them everything they need to know about any debts you have and how you have been paying them. This information can be a great indicator of where your credit score stands.

The reason they may ask for this information is if you will be handling money in your new position. Complications can arise in positions such as finance, accounts, and cashier if the employee has a lot of debt. If the employer does not like what they see on your credit reports, they may deem you a financial risk due to the potential to be involved in embezzlement and you might end up losing the position.

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It will affect your mortgage rates

Having a good credit score is an indication that you pay off your debts and cater to your financial obligations as you are supposed to. Both of these show lenders that you will pay back any amount loaned to you in the agreed period and as agreed.

Having a low credit score often indicates that you are a risky borrower and might struggle to pay back debt, which leads to higher interest rates on amounts borrowed, including mortgages and personal loans. The difference in even a half percentage point on your interest rate can make a massive difference when talking about hundreds of thousands in payments.

Some lenders might also decide not to give you a mortgage if your credit score is too low. Those that accept you with a low credit score will charge you a higher interest rate. Having a high credit score can make a difference of thousands of pounds on your payments.

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It determines your eligibility for business loans

If you want to expand your business, the easiest way to go about it is to borrow money. What a lot of people do not realise is that there is a direct relationship between their credit score and their ability to qualify for business loans. As with mortgages, lenders use your credit score to gauge your financial soundness, which gives them an indication of whether you will be able to repay the loan. For many of these lenders, your personal finances, and how you handle them, are an indicator of how you handle your business finances.

Saving potential

A low credit score often means that your debts exceed your income. Because of this, it becomes almost impossible to pay off your debts and you enter into a cycle of paying debts each time you receive a payment, with the debts remaining at the same level, especially if there is an interest rate applied to the debts. Additionally, these debts could indicate that you are living beyond your means and you may have to adjust so you can pay off these debts.

When you are having a hard time catching up and are in a cycle of borrowing and repaying, you might not have enough capacity to save for your future or retirement. Without adequate savings, you are staring at a very bleak future. The one debt that gets people into this cycle is credit card debt. With high interest rates and monthly payments, you may have little left over to cater to other needs.

To correct this, you can start improving your credit history. This involves checking your credit reports regularly to ensure all information in it is accurate, paying off your debts before deadlines pass, paying off debts in full, and not having too many credit cards, as these can lead to even more debt. For help with paying off your credit card debts and improving your credit history, Tally has a useful blog post on the topic. If you’re in the US then their service can help you craft a custom payment plan, optimise your payments so you can raise your credit score, and help you avoid late fees and overdrafts.

It affects how your use credit cards

A high enough credit score gives you access to credit cards that might come with some perks like bonuses and prizes. Having a poor credit score, on the other hand, can make you unfit to use your credit card. For example, the credit card provider will lower your credit limit and reduce the amount you can spend at certain retailers. Additionally, they may reject your application for lower annual rates. Lastly, the credit card provider can close your account when they see your credit score fall below a certain score.

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It affects your rent

Many landlords prefer tenants with a high credit score. This is due to their perceived ability to repay their rent on time. In some cases, those with a high credit score can also provide some leeway to bargain over the rent with their landlord. When successful, this can help you save money in rent every year, thereby helping you put a lot more into savings or other areas of benefit to you.

Monthly bills

Another area that a lot of people do not consider is whether utility companies check credit scores. Yes, they do. Service providers like insurance providers and phone companies will often charge higher fees if your credit score is low. This is almost always true for gas, water, and electricity providers. Also, you may be asked for a deposit ahead of time for these services.


If you already have a home that you pay monthly, you can talk to the bank about refinancing the home so you can pay a lower interest rate. If your credit score is below a set threshold, you may not have any refinancing options available to you.

This means that you end up paying thousands above what you would have paid for the home should you have been able to refinance. This can have serious repercussions on your financial future.



All of the issues above will lead to you spending a lot of money over what you should have spent over the years. This can reduce your capacity to save and invest for your retirement. Your quality of life after retirement will be affected, as will your ability to maintain a comfortable lifestyle.

Although a lot of people see and feel the effects of a low credit score in their daily lives, there are a lot of repercussions in their financial future. Seeing all the above effects, everyone should find ways to improve their credit score to ensure a brighter financial future.


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