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:
“The middle years are ones in which children increasingly face conflicts on their own,... One of the truths to be faced by parents during this period is that they cannot do the work of living and relating for their children. They can be sounding boards and they can probe with the children the consequences of alternative actions.”
—Dorothy H. Cohen (20th century)
“War is thus divine in itself, since it is a law of the world. War is divine through its consequences of a supernatural nature which are as much general as particular.... War is divine in the mysterious glory that surrounds it and in the no less inexplicable attraction that draws us to it.... War is divine by the manner in which it breaks out.”
—Joseph De Maistre (1753–1821)
“If you are prepared to accept the consequences of your dreams ... then you must still regard America today with the same naive enthusiasm as the generations that discovered the New World.”
—Jean Baudrillard (b. 1929)