Trust me, you don’t want this life
Consequences of poor credit, and misuse of credit
Almost no one, wakes up, and chooses to have poor credit, It isn’t a thing people are actively desiring or wishing for. Somehow it happens to many people. And most everyone has a story about how having poor credit stopped them from getting something they desired. Too many people know about credit, but don’t truly understand what it is. So their exposure is based on credit being the reason you don’t get a car you’ve always wanted or get a loan that would help you with home repairs. This article is a brief explanation of how and why poor credit can have major consequences, some of which you may not have intended to cause.
While there is no official starting point for “poor credit” in most instances the designation is attributed to scores below 580. For lenders who rely on credit, borrowers who have a score lower than 580 they are considered risky. These borrowers are extremely likely to have many negative marks on their credit due to negligence or other undesirable results. Some of the more common negative aspects that contribute to bad credit include previous delinquencies, high debt balances, and recent bankruptcies. This is why there is such an immense benefit to paying your bills on time and developing a diverse mix of credit types.
Credit score ratings are based on a few key metrics: payment history, amounts owed, length of credit history, credit mix and new credit. These five metrics are the basis of how your credit score is assessed. People who have bad credit, they may experience unexpected credit limit cuts, interest rate increases, or receive communications from debt collectors.
As stated earlier, having bad credit indicates to lenders that you are a risky borrower. Which makes lenders apprehensive to provide funding to you, and lenders who decide to approve you are typically offer loans with high interest rates or other unfavorable terms. Bad credit has many far-reaching impacts that extend beyond home and auto financing. Some landlords may not accept your application unless you have a cosigner.
Not only does poor credit affect you financing options, potential residence and employment, it ca also complicate other aspects of daily life. For example, you may be required to put a security deposit on utilities as a part of establishing the account. For those with desires of entrepreneurship, poor credit will certainly cause difficulty with starting your business and getting funding. One way that poor credit can cause financial strain is in regard to insurance. Many insurance companies use a credit-based scoring metric to assist with their evaluation of your overall premium.
Being surrounded by indications of poor credit is a sign that you have a lot of room for improvement with your credit. The first step is to decide that you want to do something about your current situation, which starts with taking a look at your credit and deciding how best to start working down your debts. Another helpful step is to pay on your current debts in a timely manner, and avoiding new debt as much as possible.
