Bad Credit Facts:

Facts About Bad Credit:
Your credit rating is the most important figure in your financial life. It is more important than how much money you earn, it is more important than what financial institution you use, it is more important than the investments you make.

Why is your credit score so important? Because when you are considered to have bad credit, all of the things mentioned above may become impossible.

Understanding What A Bad Rating Means In The Real World
Credit ratings are now used to determine many things in your life including:

  • The ability to receive a promotion at work. Many employers are now checking credit scores, and if you do not have a good rating they deem you as irresponsible and you are overlooked for a promotion.
  • The ability to get a job. Many employers are screening employee’s credit records prior to hiring. Employers see bad scores as a risk and will overlook the application.
  • Car insurance rates. If you have poor credit you will pay higher premiums on your car insurance. Insurance companies believe that people with poor credit arte subject to risky behavior which results in bad driving.
  • Higher health insurance rates. Health insurers also believe that poor credit scores are a result of risky behavior making you a higher risk for medical care.
  • Utility companies. Your utility deposits may be doubled if your credit rating is bad.
  • Apartment rentals. You may be required to place a higher deposit on an apartment or be denied acceptance in an apartment community if your score is bad.
  • Inability to get a mortgage or you may be required to pay for mortgage insurance if you do qualify.Having a poor credit rating will also determine many things in your financial life such as:
  • Inability to establish new credit lines
  • Paying much higher interest rates on credit cards and personal loans, if you can get approved for these lines of credit at all
  • Inability to qualify for financing on a new car
  • Paying high interest rates on a used car loan because of your risk factor
  • Inability to have a checking account. Many lenders will not even consider giving you a high risk account if you do not have a checking account.
  • Inability to establish an investment account. Many investment companies will not open an account for you if you have questionable credit because you pose a litigation risk against the brokerage. Companies that you owe money can sue against your investments, creating a financial burden on the company.

Why Interest Rates Matter
When you have poor credit, each time you receive a new line of credit you will pay a higher interest rate than if your credit was considered good. This increases your debt burden, which in turn increases your risk of default and further bad marks against your credit.

As an example: At 9% interest you will pay an extra $9 for every $100 worth of debt you have. Most good credit charge cards range between 5 and 9% interest rates. However, in most cases, bad credit interest rates are around 32%, which means you will pay $32 for every hundred dollars, significantly increasing the amount you have to repay. This large interest rate will charge your card to the limit in no time, putting further stress on your credit score.

Inability To Make Purchases That Matter
When your credit is considered bad, you may be denied credit for the things you need, or the things that you desire. Purchasing a home is one way to significantly improve your credit rating, however without a good credit score this may be impossible.

Bad credit will lead to paying higher mortgage rates, which may cause you to be denied for the mortgage due to the size of the debt you will be taking on. Banks consider the overall debt of the mortgage, not just the purchase price. If they feel that you are not capable of repaying, you are denied, no questions asked.

Purchasing a car, furniture, and even clothes for work may become a hassle when your credit is bad. Retailers and car lots are no longer as lax as they were before the economic downturn. People who were thought to be a risk before just received lower credit limits. Now, these same people are receiving rejection letters.

What To Do With A Bad Score
If you find out that your credit is bad there are things you can do to improve your score. Make sure that all your bills are paid on time each month. Payment history affects 30% of your score. Make sure that you keep your balances low on your accounts, or try to pay down some of your high bills. Credit utilization will account for 35% of your score.

Refrain from applying for too many new accounts at one time. Credit companies will lower your score if they think you are desperately seeking financing. Review your credit report for errors. A simple typo can hurt your score.

Finally, if you have done everything you know how to improve your score, seek the help of a professional. Sometimes it takes the help from someone not attached to the debts to see where improvements can be made.

We are pleased to extend to you the same professional service online as you would receive in our office.
You may use our services to apply online for a personal loan.
 
 
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