Bad credit results in the inability of a company or companies to trust the individual seeking credit facilities in terms of their ability to repay the same at the exact agreed upon time. Every time you utilize credit, your details are collected from various financial institutions by credit bureaus, which in return grade you and generate your credit score card. This scorecard is used by credit providers in abiding to understand your credit behaviors.
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Credit may be required for personal needs or business needs. The good credit increases your levels of attractiveness to any lender. One may need to understand what happens when you have bad credit? Here are some costs that you should be aware of: –
1. Bad credit decreases the ability to negotiate for facilities with good interest rates.
When an individual has good credit, they can walk into any credit provider and negotiate interest rates. The fact that you can prove to be reliable and pay your credit facilities on time levels the playing field giving you leverage over most. Bad credit may sometimes increase your interest rates because lenders make you pay for the risk. Always remember that your credit score heavily influences levels of interest rates and terms extended to you.
2. A bad credit reduces your attractiveness to many providers.
The inability to repay loans closes doors and makes you a riskier applicant to many lenders. No one wants to provide credit facilities to an individual or organization that has bad credit or has been listed. Creditors use the credit score to determine your repayment behavior and ability to repay loans.
3. Decreases your chances in getting jobs
There are certain jobs that we go after that requires one to have certain behavior or attitudes
towards money. For example, if you are to work for a financial institution, you will require a
good credit score to show your employer a certain level of discipline or strength of financial
4. Bad credit can be a potential threat to relationships
As a newlywed couple, you dream of getting children, the house with the white picket fence and even more. None of these dreams may be possible if the couple has to combine earnings and either party has bad credit. It would require time and discipline to improve the credit score which may cause some strain in the relationship.
With the increase in the cost of living in today’s world, it’s important that you review your credit score and work towards improving it. To avoid the costs of bad credit, you should do the following: –
- Always pay your credit on schedule. You may think that you are getting away with it, but you really are not. Place the payment dates on a reminder at least 2 days beforehand and ensure that your balance supports your monthly repayments.
- If you have a balance with a lender, always work hard to eliminate it. Do not let the amounts pile up. Occasionally, if able to pay an even bigger amount than your recommended, do so and the credit rating will improve.
- Never leave old accounts open if not in use. Always close them so as not to accrue charges.
- Always review your credit score report. These will help you understand your credit position.
- If you have missed your payments due to any reason, ensure you repay them. Plan your income to accommodate current and past credit repayments.
- Last but not the least, if you are having trouble repaying your loans, always contact the lender and explain your position before it’s too late. You will be surprised; they are always willing to help you improve.