Common Bills Affected by Your Credit

Late bill payments can hurt your credit score, and a lower score can cost you more in the long run. A poor credit score often results in higher interest rates, fees, and even insurance premiums, which can significantly increase your monthly expenses.

Payment history is the largest factor (35%) in determining your credit score, according to FICO.¹ That’s why making on-time payments is one of the most effective ways to protect your finances.

Here are some common bills and financial obligations that can be affected by poor credit:

Rent

Landlords frequently conduct background and credit checks before approving lease applications. A low credit score may lead to:

• A larger security deposit
• A requirement for a co-signer
• A higher rent amount
• Denial of the application entirely

Under the Fair Credit Reporting Act, landlords must notify you in writing if they take “adverse action” based on your credit.²

Mortgages

Credit scores have a major impact on mortgage rates. In 2024, borrowers with credit scores below 680 often pay over 1% more in interest than those with scores above 740.³ On a $300,000 loan, this could result in paying tens of thousands more in interest over the life of the loan.

Auto Loans

Lower credit scores can result in significantly higher interest rates on auto loans. According to Experian’s Q1 2024 State of the Automotive Finance Market report, the average interest rate for new car loans was the following:

• 6.4% for prime borrowers (661–780)
• 11.6% for subprime borrowers (501–600)

Even a few percentage points can add thousands in interest over a typical 5-year loan.

Credit Cards

Your credit score affects your eligibility for new credit cards and the interest rates you’re charged. Consumers with poor credit (below 580) may be limited to secured credit cards with higher fees and APR ranges above 25%.⁴ Late payments on any credit account can lead to the following:

• Penalty APRs
• Reduced credit limits
• Damage to your credit score

Student Loans

Federal student loans generally do not require a credit check. However, private student loans do, and your credit score can impact both approval and the interest rate offered. Students or parents with low scores may need a co-signer and will likely pay higher rates.

Auto Insurance

In most states, insurers use credit-based insurance scores to set premiums. According to a 2023 Consumer Reports analysis, drivers with poor credit can pay up to twice as much as those with excellent credit—even with a clean driving record.⁵

Only California, Hawaii, and Massachusetts prohibit the use of credit in setting auto insurance rates.

Homeowners Insurance

Insurers often use credit information to calculate a credit-based insurance score. While it’s different from a credit score, it draws on similar data. A lower score can lead to higher premiums or even denial of coverage.

Improving Your Credit

To reduce the impact of poor credit on your monthly bills, consider these steps:

• Pay bills on time—set reminders or use auto-pay
• Reduce credit card balances
• Limit new credit inquiries
• Check your credit reports regularly and dispute any errors

Working with a Money Coach who specializes in credit can make a big difference. Your coach can help you:

• Access and understand your credit reports
• Dispute inaccuracies
• Build an action plan to improve your score and reduce borrowing costs

Call 888-724-2326 to get started and take the first step toward stronger credit and lower bills.

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¹ FICO. “What’s in My FICO® Scores?” https://www.myfico.com/credit-education/whats-in-your-credit-score

² Federal Trade Commission. “Using Consumer Reports: What Landlords Need to Know.” https://www.ftc.gov/tips-advice/business-center/guidance/using-consumer-reports-what-landlords-need-know

³ Freddie Mac. “Primary Mortgage Market Survey® Results.” Accessed May 2024. https://www.freddiemac.com/pmms

⁴ LendingTree. “Average Credit Card Interest Rates.” Accessed May 2024. https://www.lendingtree.com/credit-cards/rates/

⁵ Waddell, K. (2023, April 26). “Credit Scores and ZIP Codes Make Car Insurance Pricier in New York.” Consumer Reports. https://www.consumerreports.org/money/car-insurance/credit-scores-zip-codes-make-car-insurance-pricier-in-ny-a8532785979/