Bad credit is something often talked about but seldom understood. Bad credit can impact plenty of factors in daily life and understanding how bad credit can hold you back can help you make better decisions about spending, budgeting and managing your own credit.
First let’s understand credit scores in general. A FICO credit score is made up of factors like repayment history, debt (both good and bad debt) and any outstanding balances. The scale is between 850 and 300 with 850 being the best possible and 300 being the lowest and ergo a bad credit score. A bad credit score is anything below 600 and a poor score is between 649-600. These scores can affect plenty of financial decisions.
Having a poor to bad credit score can affect interest rates on big purchases like home and auto loans. Higher interests rates mean longer repayment times and higher down payments for cars and mortgages in most cases. Bad credit also influences how much risk a bank is willing to give you. If you’re applying for a small business loan or an extension of credit: a bank may see you as more of a risk and may deny or augment your extension or loan amount. Bad credit can also affect smaller things like auto insurance rates and even your smartphone bill with certain wireless carriers.
How do you avoid a bad credit score? Avoid late payments on credit cards and other loan payments. Keep a solid budget and try not to spend beyond your means. Keep track of your credit score using a reliable score keeping system. Fixing a bad credit score can take time and dedication but it isn’t impossible. To learn more about credit scores and personal finance: contact The Credit Repairmen to get your credit back in control.
