In a highly commercialized and finance-oriented world, something like credit seems like a big deal. To be fair, there’s a lot going on with this, but it might not be the worst thing about having a bad credit score. But first what is credit?
In very simple terms, credit is the level of confidence that companies and financial institutions are willing to give that you will actually repay the money you borrow. You may have bad credit or a good credit score. And your future financial options may depend on your credit score.
What is Bad Credit?
In the real world, people go out of their way to avoid bad credit, but with the bills, taxes, and the rest, it can be a little difficult to make refunds. So if you haven’t repaid your loans or credit, chances are your credit score is on the negative side of the scale.
This will result in not getting credit approval the next time you apply for one or limiting your options for getting credit. In either case, people normally assume that a bad credit score could be the end, but that’s not true. There’s a way out and it’s not rocket science.
Ways to Improve Your Credit Score
Your credit score is checked and recorded in credit bureaus or companies that operate as credit reference agencies. They collect your data, track your credit history and create a credit report.
Based on your history of repayments and bad debts, they will give you a credit score. Bad credit is usually the result of a number of unfortunate defaults that occur in a short period of time. The credit score is between 300 and 850, with the priority being the lowest and the last higher.
Most assume that bad credit can be the end of your freedom and the beginning of depression. The assumption is wrong. Yes, it causes a struggle with spending and debt, but it doesn’t limit life to it.
Life with bad credit is quite manageable, but you will have to learn how to deal with it. If you have mortgage payments or bills due tomorrow, settle them first and the rest can wait. You don’t want to build up more debt than what has already been built up.
People in debt or with bad credit often lower their self-esteem to debt as well, which is completely wrong. Mindset and attitude will take you places if you want to survive this. Believe you can get out of this and you will.
What happens when applying for a loan?
If you are applying for a loan and are concerned about your score status, then you need to work on a steady stream of income. You could have a good credit score, but if you don’t have a steady income or are always missing payments, then the good credit score won’t do you much good.
If you can prove to the lender that you have a steady income, made your payments, and your creditors are in a much better mood, getting a loan won’t be difficult. You must maintain this for at least six months to a year. Because once the debt gets older, it doesn’t matter much to the lenders.
Another thing you can do, which may be a little more inconvenient, is move to a smaller or cheaper apartment. You only need to do this temporarily if your financial situation improves.
You can also postpone major purchases for the time being, such as buying a car or something similar. This usually leads to irresponsible spending and as long as you have this under control, you can manage debt well.
In addition to irresponsible spending, things like applying for a new credit card or a store credit card would complicate your debt situation. Avoid that habit that you have started paying off your creditors while maintaining your steady stream of income.
Get your debt under control
You should also look into debt settlements such as bad credit debt consolidation loans or bad loans. A professional will give a more appropriate suggestion.
Once you have your financial situation under control, the next thing you need to work on is to keep it that way. To make sure you don’t end up in the same situation again, if you have creditors, pile up bills and nothing to pay them with.
Banks and lenders often see your financial situation with dollar signs in their eyes. The more you owe, the higher the interest you will receive.
But you have to keep your head straight and find out if you really need another loan and if you can do without getting it. Once you’ve started it right, even on a small scale, you’ll be in for much better times.
It is widely believed that bad credit can have a disastrous impact on your financial health. Despite all the facts, this claim is not true; it is entirely possible to improve your credit and undo the impact of the current bad credit.
Steven Rooyen is a husband, father, senior debt advisor and financial advisor at Sort My Debt. With over ten years of experience in various financial fields, Steven has helped many people solve their debt problems and provide: debt solutions without file for bankruptcy† While he doesn’t, you can read him books and roam around with friends.