You either have good or bad credit. From a creditor’s point of view, credit scores represent the level of trust a lender has that you will repay their money. Let’s see the implications of bad credit and ways to fix your credit score if it’s bad.
Bad credit represents the inability to meet your credit responsibilities you’ve had in the past as well as the inability to find approval for new credit cards. It often results from failure to repay your debts on time or complete defiance against your credit obligations. The history of your credit account is recorded by credit reporting bureaus who compile it into a credit report. If the report contains lots of negative information such as loan default, filed bankruptcy, accounts sent to collection agencies, or late payments, then you will have bad credit. If you have multiple cases of the negative information in a limited time period, bad credit is bound to occur. The worst negative items you must avoid include repossession, foreclosure, and bankruptcy. Their appearance on your credit report scares away lenders.
The impacts of bad credit
- Lenders will hesitate to give you loans
- You will be charged higher interest rates in case you are given a loan
- Insurance companies will give you higher rates
- Utility providers will always charge you a higher security deposit upon your application
- You might be turned down by landlords
How do you know you have bad credit?
If you are keen on your financial status, you should be able to tell when you are in bad credit. Common signs are:
- Your credit score is below 620
- High credit card balances
- Missed payments
- Your recent credit card application has been denied
- Your interest rates are high
- Your credit limit has been reduced by the card issuer
You need to check your credit report to figure out the negative information that has affected your FICO score. You are entitled to free credit reports from the 3 credit reporting agencies. Alternatively, you can hire the best credit repair companies to do the check-ups for you.
Fixing Bad Credit
Your bad credit status should not last a lifetime. First, eliminate the negative items on your credit report by disputing that information or through other effective techniques that can fix your credit score. Then, focus on improving your credit by timely payment, and applying for a new card.
Your credit report information is what determines your credit scores. The credit score range is 300 – 850. The lowest scores indicate bad credit and if this is what you have, start seeking ‘how to raise my credit score’ ASAP.