Bad credit – two of the most dreaded words in the English language. Bad credit can really take a toll on a person’s life – and not in a good way. In fact, the effects can be worse that one might think.

Having bad credit can make it next to impossible to attain a new car, an apartment, a personal loan or even a home. Even something as simple as getting a new credit card will be out of the question for a consumer with negative credit history.

The most widely used credit scores are FICO scores, the credit scores created by Fair Isaac Corporation. Lenders can buy FICO scores from all three major credit reporting agencies, Equifax, Experian and TransUnion. FICO scores range from 300-850 – higher is better.

How you pay your bills and debt accumulation are the two most important factors in calculating your credit score.

Even if you’ve been fortunate enough to be able to purchase a new home or a car with bad credit, you’re still being punished in some way for your low credit score. Usually, the penalty you’ll receive for bad credit is a higher interest rate than you would have received normally.

Lenders see you as a risk and one of the downfalls of this is having to pay more in the long run simply because your credit score is low. What does all of this really mean? To put it simply, it means that having good credit and receiving a good interest rate could end up saving you hundreds or even thousands of dollars on your next loan. THE LOWER YOUR CREDIT SCORE THE HIGHER YOUR INTEREST RATE.