So You’ve Got a Bad Credit Score, What’s the Big Deal?
When you’re weighed down by bills, loans, and debt, not to mention overwhelmed by attending school, going to work, and raising a family, it may seem difficult to find time not only to fix your credit score, but to care about it too. But the problem with ignoring your credit altogether is that it could negatively determine your financial future.
You see, putting your credit report on the backburner may not seem to affect you right now, but if you’re engaging in poor financial habits, your credit score will suffer as a result and could affect you later on. And despite what those gimmicky companies promise about fixing your credit score overnight, the truth is, it could take years for you to repair your credit score. So while you may not be in the market for, lets say a loan or rental property today, but how about in five years from now?
Experiencing Bad Credit Implications
Hopefully you’re already aware of the fact that most traditional lenders will request a copy of your credit report when you apply for a loan. Since they’re supplying you with money, they’ll check out your credit report to determine your financial responsibility, so that they can predict whether you’ll pay them back.
If you have a poor credit score, they may hike up the interest rates and fees to accommodate your risky behavior, or they’ll deny you. If these traditional lenders reject your loan request, your only option may be a payday loan from a bad credit lender, who usually won’t conduct a credit check.
As for renting property, it’s a similar deal. Oftentimes, your future landlord may ask to take a peek at your credit report to determine if you’ll pay your rent each month based on your past monetary habits. If your credit score is in the dumps, it could cost you your dream rental.
Fixing Your Score
When it comes to repairing your score, the first step is to realize that it shouldn’t be a chore. By engaging in responsible money habits, you can slowly rebuild your credit score without even realize you’re doing so.
Request a free copy of your credit score from one of the top three credit reporting bureaus, Equifax, Experian, or TransUnion. With a copy of your report, you can see the areas where you’re struggling, for example if you have lots of debt and missed payments, those are areas you’ll want to focus on improving. Also, while you scan your report, search for any errors, which could potentially lower your score. If you find errors, send a letter with your claim to the credit reporting agency to request an investigation.
Now although there are numerous ways of building back up your credit, your payment history and utilization rate are two areas that have a lot of weight in your total credit score.
Therefore, the easiest way to improve your score is to make all of your credit card and loan installment payments on time and create reminders for yourself if need be. Paying your bills won’t cancel out your previous late payments as those marks could stay on your credit report for up to seven years, but timely payments can help eventually bump up your score.
Another simple, yet effective way to boost up your score is to maintain low balances on all your credit cards and other forms of revolving credit. This is because the more credit you use, and the closer you inch toward maxing out your cards, the lower your score because credit reporting agencies consider that risky behavior.
Keep in mind that while you may not experience any negative effects from your bad credit score today, leaving your financial future up to chance could take its toll in the future.
Chloe Mulliner writes and edits for CreditSources.org, a site that offers credit and loan information and services for people with bad or no credit history.
Category: Credit
