NEW YORK ( MainStreet) — Sure, you know that having bad credit can mean paying more for a car loan or a mortgage. You know that it means you can pay more to use your credit cards. But did you know that people with bad credit also pay more for their car insurance and sometimes even for rent? There are more costs of having bad credit than you might know.


Increasingly, employers are using credit reports to help make decisions of hiring and firing. Randy Padawer, a consumer advocate with Lexington law states that more than half of all major companies are using background checks as part of a pre-employment screening. "I think it's unfair," he says, but quickly adds "it's something that consumers must remember when they're doing something as mundane as paying a credit card bill."

Gail Cunningham, vice president of membership and public relations for the National Foundation for Credit Counseling points out the reason why credit reports are increasingly used in hiring decisions. "Potential employers might view your credit report as an overall reflection of your responsibility."

What's the cost? Tim Lucas, vice president of mortgage at, breaks it down. "Say that you have to take a job that pays $10,000 a year less because you have bad credit," he says. "That's $100,000 over ten years." While the math is obvious, what might not be is that, in the case of employment, you might be losing more than you would because of high interest rates on a mortgage.


"Car insurance is a big one," says Lucas, adding that drivers sometimes pay double what they would pay if they had better credit scores. Why are car insurance companies pulling your credit report to see what you should pay? "Car insurance companies assume that if you're not responsible with your finances that you might not be a responsible driver," Lucas says.

The good news is that if you live in Massachusetts, California and Hawaii, you're not affected by this: it's against state law in those three places.

It's not just car insurance, either. "All kinds of insurance companies are pulling credit reports," explains Padawer, adding that "There's a correlation between the number of claims filed and the total cost of these claims and a person's credit report."


Perhaps the worst hidden cost of bad credit is your apartment. Padawer points out that "rentals are just about the only thing that isn't on your credit report." This means that you might be the most responsible person in the world when it comes to paying your rent on time, but your landlord will never know it: your rental history appears nowhere on your credit report.

On the other hand, Padawer is quick to point out that "there are almost no landlords who won't want to look at your credit report." To feel comfortable with renting to you, a landlord might charge you a double deposit -- no small fee, especially in a larger, more expensive city like Los Angeles or New York.