Bad Credit May Cost You More Than You Realize

Bad credit does not have to be forever.

For the individuals whose financial records have been scarred by foreclosures, delinquencies or bankruptcies, there are still opportunities to better your credit.  For those who are still building their credit record, it is always good to start slow but with caution.

However, a lot of these people know too little about how disastrous the drawbacks can be having a bad credit. This is according to a survey conducted by the NerdWallet.

Bad Credit can be Very Constraining

Most people know that it will be hard to get mortgage loans, car financing, student loans and other financing products if you have bad credit. The effects of having bad credit can ripple even to other services you wish to avail. Bad credit may cost you more than you realize.

A low credit score can negatively impact the acquisition of car insurances, utility deposits, and phone services.

The survey revealed that many Americans are unaware of the negative effects of poor credit standing on these services. The implications of having a low credit score in their day-to-day living are simply inexistent to them.

Click to See the Latest Mortgage Rates»

Poor Credit, Limited Credit Card Access

A person who has a credit score of 600 will face difficulties in obtaining credit cards in the market. This is according to the NerdWallet. But, many of the survey respondents believe otherwise. A fifth of them are unaware of this fact.

For a borrower who has a stellar credit record, the person may have eight times more credit card options offering really great deals.

Changes May Result in Improved Credit

In July, Equifax, Experian, and TransUnion have started excluding tax liens and civil judgments for consumers’ credit records if they lack required personal identifying information.

Consumers credit reports may be cleared with some adverse events, as announced last February. This action will instantaneously improve credit scores.

When the expungement process kicks in, credit scores should significantly increase by less than 20 points. This according to FICO.

Click to See the Latest Mortgage Rates»

How Do You Rebuild Your Credit?

 

Always begin by reviewing your credit report.

By doing so, you will know your financial situation. You will see the areas you need to work on and improve. You should also be able to make corrections to any system errors reflected on your credit report. As soon as these mistakes are removed, your credit rating will instantly improve.

Make sure you pay your dues in full, on time.

Missing payments and not paying in full will take a toll on your credit report. As per the NerdWallet survey, more than a third of the respondents believe that carrying a small balance on their credit card will improve their credit score.

Leaving a balance every month will not have a positive impact on your credit score. Doing so will only increase your interest charges. The best thing to do is to always pay off your balances in full every month.

Do not cancel out old credit card accounts.

When you have a credit card you haven’t used for years, you immediately think that the wisest thing to do is to close it. However, This may not be a good thing to do.

The longer your credit history, the better your credit score. This is why those who have a limited credit history are given lower credit scores. They do not have substantial credit history on their side.

Have patience if you are rebuilding your credit. It will not happen overnight. But if you stay consistent in improving your credit report, the positive effect will also ripple to the many aspects of your life. Remember, better credit score equals better financial options. It will be worth your time and effort, so be patient.

Click to See the Latest Mortgage Rates» Get Your Free Mortgage Loan Quote Today