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.
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I’m grateful I have a good credit score but sometimes you never know what can happen but you make some great and helpful points x
It’s best to be aware of where you stand and keep your score as good as possible.
Great advice! I don’t even know what mine is! This is so useful
I suggest you check your credit score with Experian.
That is why I am too scared to use my credit card and use my debit card instead because I know I am not great with money , I definitely don’t want a bad credit score. I like the idea of paying in cash though x
It is good to use credit cards sometimes but you need to stay on top of it and pay them off asap.
It is so important to get this kind of thing under control. Mortgages are so much harder to get these days!
I have my credit report emailed to me once a month, so I can keep an eye on it and fix any problems that might crop up. You never know when you’ll need a spotless credit rating, so it’s very important to keep it looking healthy! x
That’s great and shows you are in control.
Some fab tips, I use clear score and my credit score is lower on therethan when I check on experian, my housing association has introduced a new scheme with the big issue where every week when I pay my rent my credit score will go up, which will be a great help xxx
That’s great as it will help increase your score.
I don’t even have an overdraft limit on my bank. I wouldn’t want to give myself I chance to. I just budget well 🙂
It is very important to budget well.
I’ve never had an issue with my credit score luckily but I know people who have and these tips would be useful for them
It can be easy to build a bad credit score if you are not careful.
Luckily I’ve never had a problem! But my friend seems to be constantly having problems! I’ve shared this post with her and she said to tell you thank you, that your post is super helpful!
Aaahhhh thanks Jade. I’m so pleased to have helped with my post. I hope she can improve her score.
I always pay bills on time and don’t have a credit card, so feel super lucky my score is good!
My credit score is quite poor at the moment, but I’m all sorted now, so hopefully it’ll be on the way up!
I hope it goes up soon x
This is a good insight – for those that have bad credit score, steps that they need to take. And for those that doesn’t things to avoid and do to keep their score good. Manage our finances is really a big part.
It sure does make a difference if you are organised and try to manage your finances.
This most certainly makes me to go back check my credit score. A very informative post. Thank you so much for sharing this information.
No problem, glad to have helped 😉
I don’t have credit card/s and I won’t be getting any since I feel uncomfortable having debts/credits. As much as possible I try to save on piggy banks and savings account.
The problem is when you haven’t built up a record of paying off items on time it can be a problem when you want to buy a large item such as a car or house.
it sound so interesting, we do not have this problem in israel, no credit score goals numbers for us, but I can see how it can help for someone who live in a country that has it
It is a good way to keep track of people and can help people control their finances.
Thanks for the advice. The only thing I have on finance is my car, and don’t I have any credit cards. I like to save for the things we want to buy!!
I know what you mean I hate owing money to anyone.
Over here you are not scored on credit but there are levels and if you fall in a lower one then you have bad credit. If you can”t pay in cash, you can’t afford it.
That’s good to know. There is no point putting your self into debt unnecessarily.
I learned the hard way at an early age (my late teens), just how much of a difference having a low credit score makes. Since then it’s been a long hard climb back to respectability but I’ve finally made it. Hopefully your advice helps someone before it’s too late for them!
Thanks for your comment. Me too, the idea is to make people think about these things rather than take them for granted.
I am sharing this information with my husband..he will surely find this one useful!
i definitely have bad credit score..so it will take ages to get it going…so these tips will help…its funny i always have money but im lax when it comes to paying on time cos i know i can pay whenever i feel like it….so badddd
It is a bit naughty, try and keep on top of it and it will pay off.
I used to have credit cards and found it to easy to spend money I really didn’t have. My budgeting skills are a lot better than what they were 10 years ago. Nice informative post 🙂
Thanks for your comment Phil I hope it has helped people think more about being careful with their spending.
A great informative post, I wasn’t aware that employers were allowed to find out your credit score! xo
I wish I had been given more advice about credit scores when at school along with other forms of money management, I think it would have helped me and so many others!
It is best to teach this as early as possible as it can help in the long run.
Ah, some great tips here – really informative! Thanks for sharing 🙂
Glad to have helped Jazmin.
great tips for those that need this advice. Thanks for sharing
No problem Michelle 😉