A bad credit score isn’t just a number sitting on your credit report. It’s a rating that can have a significant effect on your day-to-day. Read ahead to find out what happens when you have “bad” credit and what you can do to remedy it.
There are a few consequences that come with having a lower credit score that you should know about. The first is that you are more likely that have your requests for new credit accounts denied by banks and other financial institutions.
If you do get approved for a new account when you have bad credit, you’ll sometimes get saddled with a higher interest rate than the average borrower. The higher interest rate is to incentivize you to keep your balance lower. That way, you’re less likely to default on bill payments.
Higher interest rates aren’t the only thing that you can expect. Sometimes people with poor credit scores often have to pay higher auto insurance rates than other drivers. Other types of insurance (life, home, renters, etc.) can do the same. You might spend a lot more on coverage than you’d like.
Here are some more consequences that can come with a lower credit score:
There’s no need to panic about the score. It’s not set in stone. You can bring it into a higher category and avoid these consequences altogether. These are just a few tips that could improve your score over time:
Your credit mix is the variety of credit accounts that you have open. If you only have a few credit cards or installment loans to your name, you might want to strengthen your mix by adding something like a personal line of credit to your financial portfolio. Click here to see how you can speak to a financial institution to learn about personal line of credit qualifications and terms to see if you can apply. It’s a simple move that could quickly strengthen your credit mix.
One late bill payment won’t do much to your credit score. But if you consistently make your repayments well past the due date, you’re going to do some damage.
To stop yourself from missing these important payments, download calendar apps or bill monitoring apps on your phone. These will send you reminders to make payments. Or you can automate your bill payments so that the amount comes directly out of your account when it’s due.
In times when you’re not sure you can afford the bill by the due date, contact the creditor to ask if they have a grace period. This could give you more time to come up with the funds.
A heavy debt load can have a negative effect on your credit score, especially if you’re not keeping up with repayments. If you want to boost your score, you should try your best to tackle that debt.
These are some strategies that can help you whittle it down:
Your bad credit score doesn’t have to sit on your credit report forever. You can change it for the better.