A bad credit score might not seem like that big of a deal, but it can have pretty overwhelming implications for both your current finances and your ability to get a handle on financial problems in the future. If you have a good credit score, it is equally important that you keep that score looking healthy for as long as possible. If however things are already looking a bit grim, there’s no need to panic. You simply need to understand your current situation a little more, and start to explore ways of improving things.
How does a bad credit score happen?
Bad credit occurs when you have you don’t have a strong history with credit agreements. If you’ve ever gone into your bank overdraft and stayed there for too long, your credit score will be affected. Going over your overdraft limit, as well will usually result in a fine and will also knock your credit score. A bad credit score usually indicates more than just one or two offences.
A credit score in the 600-and-below region is known as “sub-prime”. This means you’re considered a less-than-excellent candidate for things like loans and other contracts. Subprime loans are possible, but since they were a major contributor to the 2007-8 recession, they’re not so common these days!
A quick note about differing credit scores
You don’t have a universal credit score. Different lenders will have different credit scoring models; some lenders will care more about certain “offences” while others won’t think that much about them. Getting a bad credit score from one lender doesn’t necessarily mean you’ll get the same score from another. It’s usually a good indication that you have problems that need to be fixed as soon as possible.
How will a bad credit score affect me?
Getting a credit card probably won’t be a problem, although you may have to deal with an interest rate that’s higher than usual. Being able to get your hands on certain gadgets on contract can be a problem however, but it’s not impossible to get an iPhone 7 with bad credit. Home or car insurance may cost you a lot more; this is because people with poor credit are statistically more likely to make insurance claims.
A prospective employer may be allowed to look at your credit report and may determine your job suitability on the basis of that information. A landlord is also allowed check your score before deciding to rent a property to you. Employers and landlords don’t generally need your consent to find this information!
How to start fixing the problem
Lessen future credit agreements as much as you can. Start paying cash for your purchases instead of using your credit card. Each card transaction is a small credit agreement. Paying off due balances is perhaps the most important thing! Being behind on debts is most likely the reason your credit report isn’t looking great. This may mean living more frugally for a while, which probably doesn’t sound that fun. But the financial control and freedom you’ll gain in the long run will make it worth it.
Enjoying this post? You can subscribe to Melanie’s Fab Finds to have posts delivered straight to your inbox once including recipes, reviews, competitions etc. before anyone else. Don’t worry I won’t spam you.
Watch our product reviews on YouTube:
Photo credit Pixabay and Pexels