Having a credit card at your disposal can bring a large amount of convenience for your daily spending. However, if you do not maintain a good record of your daily expenses, you might end up wreaking havoc not only on your savings but on your credit score as well. Although you might not be able to feel the full extent of a bad credit score at present, you will feel the brunt of your actions in the future.


What is a credit score?

In a nutshell, your credit score is determined by your current level of debt and your credit card payment.  For Canadian residents, the best credit score that you can get is 900 while the lowest score that you might have if you have just received your card or if you are under a large amount of debt is 300.

The reason why credit scores are important is due to the fact that most businesses will determine your eligibility to acquire a loan on your credit score. It is extremely difficult to get a perfect credit score so you should generally aim to get a score of 650 or higher if you wish to qualify for a standard loan. However, if you get a score that is 600 or lower, then you might even struggle to find a new job or a place to live.

If you want to keep track of your credit score, you can simply send an order via telephone, fax, or mail to one of the nearest credit reporting agencies in your neighborhood. You also have the option of going to the agency yourself and claiming your annual report. Most of these agencies offer this service for free but you can also pay for the service if you want additional services to be included in your order.


What are the effects of a low credit score?

Aside from your personal copy, landlords, employers, insurers, and lenders can also request for a copy of your credit score report. In general, they will use your score to evaluate your spending habits and to determine if you are a worthy investment. Listed below are some of the more specific effects of a low credit score on your future prospects.


Higher interest rates

Unfortunately, if you are currently running low on cash due to your reckless spending habits, you should be prepared to hurdle even more future expenses if you incur a low credit score. Lenders and creditors will likely consider your bad credit standing as a large risk and charge you a much higher interest rate to compensate. Major loans in particular will have you paying for a higher interest rate than you would if you had better credit scores.


Rejected house and utilities applications

Though most landlords would choose to stay out of the private lives of their tenants, they will keep a close eye on your credit score if you choose to stay in one of their apartments. More often than not, prospective tenants will be denied a lease if their credit card scores are too low since they will be seen a risky client.

Likewise, most utility companies will charge for a security deposit if they happen to see your bad credit history. Even if you have a good track record of paying your bills when they are due, they will still charge the added fee if you decide to make a new application.


Difficulty in securing jobs and loans

Though your credit score will not really matter much if you are merely applying for a low level position, most employers will do a background check on your credit history if you are aiming for a job in the finance industry or for a managerial position. After all, you will be handling a lot of responsibility in the company and they would want to make sure that they can trust you. If you have a large amount of debt or outstanding bills on your report, that immediately serves as a red flag and lessens your chances of getting accepted.

Meanwhile, if you are planning to start your own business you might incure difficulty in getting a business loan. Most banks will consider your credit report before they approve your loan applications. On the off change that you are given the loan despite your low credit scores, you might be charged an extremely high interest rate instead. You might not be able to make the monthly payments if you choose to go for the higher charges and your business will suffer in the long run.

In the end, your credit score is an important factor in acquiring jobs, loans and houses. However, it does not determine your worth as a person. You should never obsess about a perfect credit score since there will always be times that it fluctuates and goes up or down. Instead, you should focus on practicing good spending habits and rebuilding your credit score when it does go down.