The pitfalls of having bad credit - specifically, a poor credit score - are most accentuated when it comes time to borrow money. Most lenders need only one glance at a bad credit score to see that the prospective borrower is a high credit risk. A lower than average credit score is a red flag to lenders that there is a history of late payments or defaults on the person's credit record. The penalty to the potential borrower is a higher interest rate, or more likely, declined credit.

So although the cost of bad credit may be obvious, and worth avoiding, it is worth revisiting some of the reasons why good credit is the better path.

• Reason #1: Access to Loans. For new families, the reality of mortgages, car loans, or even the refinancing of existing loans is only possible with a good credit record. Bad credit is costly not only in the sense that it prevents individuals and families from getting loans to purchase the better things in life, but it also has a cost in the form of high interest charges.
   
• Reason #2: You Don't Need the Stress. The weight of having new jobs, children, and all the pressures of maintaining a marriage may be enough of a burden for new families, without adding the strain of bad credit and the financial limitations that it imposes.
   
• Reason #3: Credit Reports Matter. Did you know that your credit file is monitored by credit card companies? This is true, of course, when you apply for a card with any of the major companies. But it is also true after the fact, once you are a cardholder. Upon closer inspection you will observe that many credit card agreements include a “universal default” provision that allows for the credit card companies to check your credit file periodically to see if you have late payments on your record. The companies can then penalize you with higher interest rates. Even if your payment history with a respective company is good, they can still increase your rates if they find negative items on your report.
   
• Reason #4: Good Credit May Help You Be Employable. While good credit may not help you get a job for which you are not qualified, it may give you the edge over competing applicants, or at least help get your foot in the door. Employers can in many cases determine your trustworthiness by your credit record. While this is only one indicator, a good credit report may end up being the determining factor in getting your next job.
   
• Reason #5: Good Credit Affects Insurance.  Statistics show that drivers with bad credit file forty percent more insurance claims. In the eyes of the auto insurance companies, you are more likely to be a risk if you have a bad credit score. It is worth noting that more than ninety percent of auto insurers evaluate policy applicants by their credit record.