You often hear the importance of having a good credit score and why you should take steps to improve your rating, but what are the dangers of bad credit? Having bad credit is not an ideal situation, but unfortunately it is all too common a problem. This can have a serious impact on many different areas of your life, but there are always solutions available and it is important to remember that you can improve your score.
What Causes Bad Credit?
Many people find themselves with bad credit and this could be for many different reasons. They may have borrowed more money than they can afford to repay, they may have forgotten about repayments or fallen on hard times which has made it difficult to make ends meet. Times of sudden change and disruption, such as job loss and divorce, are major causes of bad credit.
Bad Credit Side-Effects
Those with bad credit will find it much more difficult to borrow money and if they do qualify then they will incur high interest rates. This results in a catch 22 situation being created, as lenders will no longer view these people as reliable borrowers. Not only this, but a poor credit rating may make it difficult to rent a property and you may have to pay a higher security deposit.
Another difficulty you might encounter is getting a cell phone contract, as you will have the opportunity to rack up extra charges while signed up with them. If you exceed your allowance of texts, minutes or data, then the service provider will want to be paid for it. If they don’t think you’ll do so, they could reject your application.
In addition to this, some people may also struggle to find employment as some industries require that you have a good credit rating. You may also find it challenging to buy a car or borrow any kind of money. Ironically, you need access to many of these things to build your credit score, which can make getting out of bad credit a daunting task.
Another area to consider is banking as you may even find it challenging to open a bank account. Fortunately, there are bank accounts specifically for those with bad credit which have no unexpected fees and can make sure that your bills get paid on time. Bank accounts for those with bad credit do come with a monthly charge, but they act as a lifeline if you are unable to open a regular fee-free bank account and this could be a stepping stone for building better credit. These accounts are designed to make it easy to manage your money and may even have no overdraft fees.
There are many side-effects of bad credit and it can be a difficult hole to get out of because you need access to certain products to prove that you are a reliable borrower. Fortunately, there are a few quick and easy ways to start rebuilding your credit score, with solutions such as credit cards and bank accounts specifically for people with poor credit ratings. By using these tools, and committing to paying your bills on time, as well as catching up on any outstanding payments, you’ll be able to gradually work your way towards a better credit score.