Consequences
The information in a credit report is sold by credit agencies to organizations that are considering whether to offer credit to individuals or companies. It is also available to other entities with a "permissible purpose", as defined by the Fair Credit Reporting Act. The consequence of a negative credit rating is typically a reduction in the likelihood that a lender will approve an application for credit under favorable terms, if at all. Interest rates on loans are significantly affected by credit history; the higher the credit rating, lower the interest while the lower the credit rating, the higher the interest. The increased interest is used to offset the higher rate of default within the low credit rating group of individuals.
In the United States insurance, housing, and employment can be denied based on a negative credit rating.
Note that it is not the credit reporting agencies that decide whether a credit history is "adverse." It is the individual lender or creditor which makes that decision, each lender has its own policy on what scores fall within their guidelines. The specific scores that fall within a lender's guidelines are most often NOT disclosed to the applicant due to competitive reasons. In the United States, a creditor is required to give the reasons for denying credit to an applicant immediately and must also provide the name and address of the credit reporting agency who provided data that was used to make the decision.
Read more about this topic: Credit History
Famous quotes containing the word consequences:
“There is not much that even the most socially responsible scientists can do as individuals, or even as a group, about the social consequences of their activities.”
—Eric J. Hobsbawm (b. 1917)
“The horror of Gandhi’s murder lies not in the political motives behind it or in its consequences for Indian policy or for the future of non-violence; the horror lies simply in the fact that any man could look into the face of this extraordinary person and deliberately pull a trigger.”
—Mary McCarthy (1912–1989)
“[As teenager], the trauma of near-misses and almost- consequences usually brings us to our senses. We finally come down someplace between our parents’ safety advice, which underestimates our ability, and our own unreasonable disregard for safety, which is our childlike wish for invulnerability. Our definition of acceptable risk becomes a product of our own experience.”
—Roger Gould (20th century)