Do you have bad credit and a low credit score?
You may be thinking, what’s the big deal? How does my credit score affect my life?
Well, it affects your daily life in more ways than one may think. It is important that you remove yourself from the mindset of not really regarding your credit score as an important part of your life or finances.
This article will outline a number of the ways a poor credit score can damage your day-to-day life and future, and how you can improve it to resolve these things!
What is Credit?
Credit is a data set regarding the financial habits and ability to borrow money responsibly and pay debts to creditors promptly.
A credit score is highly individual, meaning it will vary from person to person.
When attempting to borrow money, rent a property, or engage in other finance-related aspects of your life your credit score can be highly influential, so it is important to strive for the best possible record.
Why is Bad Credit Bad?
Bad credit can be detrimental for a number of reasons, including:
- Lenders will be hesitant to loan to you
- You will likely pay more for a loan
- You may miss out on professional opportunities
- Difficulty renting
- Difficulty getting out of debt
- Higher rates on various services.
Lenders will be hesitant to loan to you with Poor Credit
One of the most obvious impacts a poor credit score will likely have on an individual is that creditors will be significantly less likely to engage in loans.
When reviewing your financial history, creditors will almost certainly obtain information about your credit score and will see a poor score as a glaring red flag and a reason to approach your request with caution.
This especially applies to large corporations, as why would they wish to loan money to a person with a poor credit score when they already have a large client basis with a range of higher credit scores?
You will likely pay more for a loan with Bad Credit
As aforementioned, it is likely that you will struggle to secure a loan with a creditor with a poor credit score.
However, even if you do manage to find a creditor willing, your troubles will not end there!
As a low credit score reflects inability or tardiness within the repayment of debts, loaners will probably be more hesitant to offer you the best deals their company provides, due to the less-than-great reflection of your financial history.
Interest rates will also likely be increased as both a precaution for the creditor and an incentive to pay your debt to them in the least time possible.
You may miss out on professional opportunities
Imagine you are hiring for a new position at your company.
You have two interviewers, both with similar experience and suitability for the role.
One has a high credit score; one has a low one. Who would you choose? Most employers when hiring new employees will do, to some extent, a background check on the individuals they are considering hiring.
You may be well suited and well experienced for the position at the company, but your credit score reflects poor money managing skills and a level of irresponsibility or over-extension of your monetary position.
Employers may run a credit check on any individual before hiring or promoting them, especially if the position includes a large portion of financial responsibilities.
This is yet another way a low credit score can influence your daily life, and why it is so important to strive to improve it!
Difficulty renting with Bad Credit
Finding housing can be a struggle in today’s financial climate.
Well, unfortunately, having a low credit score can make said struggle much more difficult!
If you are wishing to rent a property to live in, owners are likely also going to run a credit check to ensure you example healthy money habits and do not have large debts to your name.
If they find a low credit score, they may be more hesitant to allow you to rent their property.
Similar to the point on employment, owners are much more likely to go for a renter with evidence of good financial choices and timely debt payments than someone who does not.
Before attempting to rent, you may want to take the time to improve your credit score; you may find more success!
Difficulty getting out of debt with Bad Credit
Having a low credit score may seem like a loop.
Difficulty paying debts results in a low credit score and a low credit score results in difficulty paying off said debts.
As mentioned prior in the article, a poor credit score may increase the interest rates of your debts.
For this reason, debts become more difficult to pay off, and the debt continues to increase in value.
Higher rates on various services
As well as higher interest on debts or loans, you may also discover that there will be an increase in the payment rate for a range of utilities, utilities that you may require to complete the simplest of daily tasks.
You may be charged increased rates if you have a poor credit score.
Utilities are an essential part of day-to-day life and consist of necessities such as energy, water, gas, and the internet.
Bad Credit – How to Improve Your Credit Score
There are several steps you can take to improve your credit score. These include:
- Making frequent payments to creditors
- Fix credit report mistakes
- Only apply for credit when necessary
- Lower credit card limits
Making frequent payments to creditors
If you currently owe a debt to a creditor, try to actively and efficiently pay the said debt as soon as possible; your credit score will thank you!
Fix credit report mistakes
This one may seem obvious, but many neglects this time-consuming task until absolutely necessary.
If you notice an error on your credit report, make sure you get it fixed at your nearest possible convenience.
Only apply for credit when necessary
If you are consistently taking out new credit, you may want to halt this habit as it is likely affecting your credit score.
If credit reports show a consistent effort to avoid new credit to reduce debts, this may reflect well on you in the future.
Lower credit card limits
We’ve all been guilty of a little overspending on the credit card.
Credit cards have a way of making us feel like we are not spending actual money in order to keep us spending and, in turn, paying.
You may want to reduce the limit on your credit card to break this habit!
Key Takeaways
Credit scores may not seem like a huge deal, but it takes a hold on various aspects of your life before your eyes without you necessarily even being aware of what’s going on!
It is important that you work towards an increased credit score; you will notice the positive effects in no time at all.
If you simply cannot seem to increase your credit score and wish to seek professional help, follow this idea, and get the assistance you need.
Financial councillors and other professionals can be of great assistance!