Consumers with bad credit often experience higher interest rates and the inability to obtain financing when needed. Poor credit can make it difficult to acquire a mortgage,
auto loan or a credit card. A low credit score can also prevent individuals from renting a vehicle or apartment. The premium on auto insurance may also be higher for an individual with damaged credit
regardless of his or her driving history. Financial institutions conduct credit checks to determine if a consumer qualifies for a variety of products and services.
Our staff understands that having poor credit makes it difficult to get approved for credit cards, personal loans, car loans and mortgage loans. This is why we have created this free consumers guide called Bad Credit MD that is dedicated to helping consumers repair their bad credit, obtain credit counseling, get free credit reports, handle debt problems, learn about wage garnishment laws, filing for bankruptcy, finding second chance checking accounts, getting a mortage loan, dealing with harassment from debt collectors, learning about the statute of limitations on debts, plus locate credit cards and loans from sub-prime financial institutions in the United States, United Kingdom (England, Wales, Scotland, Northern Ireland), Ireland, Australia, New Zealand, India and Canada.
Understanding How To Deal With Bad Credit
Many people are familiar with the term bad credit although there not aware of what it actually means or how it is measured. Bad credit describes a person who has a history of breaking formal financial agreements with creditors and other institutions. Each debt or loan that is not repaid or that is paid late is reported to a credit bureau. The bureau records the information in a report attached to that person. This is known as a credit report. These files generally contain information from the last 10 years although older debts might be listed if there are continuing actions against an account. Some agencies calculate a numerical score or letter grade based on a credit report. This is called a credit score.
There are a number of different causes for bad credit. In most cases, a single late or missed payment will not affect credit to the point where it is considered bad. Bad credit forms because of a pattern of behaviors. The most common cause is credit card debt. Multiple missed or late payments will eventually lower a score. Carrying a high balance for a long time is also detrimental. Other causes include consistently late utility payments, defaulted loans and having a bill passed to a collections agency. Bankruptcy and repossession of an asset like a car are particularly harmful. There are many other things that will lower a credit score including carrying a negative bank balance and applying for multiple new lines of credit over a short period of time.
Bad credit matters because lenders and financial institutions use it to assess risk. Risk in terms of credit is the likelihood that a person will repay a loan or fulfill a financial agreement. Banks and other companies will only decide to trust a person with credit or a loan if there is a good chance that the money will be repaid in a timely manner. People who receive credit and who do not repay cost the lender a large amount of money even if a collection agency or other agreement eventually recovers the money. The financial history or score of a person is assessed by lenders in order to determine the risk an individual poses. Unfortunately, not all banks look at specific circumstances. Some institutions just rely on a summary or credit score. It should also be noted that lenders often look at a person with no credit negatively because there is nothing to assess when calculating risk. A person with very little or no credit history is said to have a thin file.
Effects Of Bad Credit
Bad credit has a large effect on many areas of life. It will prevent a person from acquiring new credit cards or loans. It will make it difficult or impossible to receive approval for financing when making a purchase. Many apartment management companies will not rent to a person with bad credit. Even a person with an existing mortgage might not be able to refinance if their credit history is very poor. An increasing number of employers are starting to consider credit when hiring new employees. A low score could also make it very difficult to activate utilities like electricity and phone service without a large upfront deposit.
There are a number of different ways to start to improve a bad credit score. The first step is to resolve any outstanding issues like an overdue bill or loan. There are options such as debt consolidation and debt negotiation that attempt to reach an agreement with lenders that will allow the debt to be removed in a structured way. These services might even be able to lower the amount that is owed. The next step is to start to build good credit. This process can take anywhere from a few months to a few years. This is done by acquiring a new credit card or loan and then making payments on time every single month. Most people with bad credit start by applying for a secured credit card that is backed with a deposit in case payments are missed. Another option is to take out very small loans from a local credit union or other source willing to help restore your score rating.
It is essential that anyone who is starting to rebuild good credit take steps to prevent the same situation from occurring again in the future. This often means attending a credit counseling program. These types of services will provide tools and knowledge for budgeting, dealing with bills and responsible spending. It is also important to maintain payments on all debts and to take every action possible to prevent falling back into a pattern of revolving debt. Taking proactive steps in order to learn how to maintain good credit will be invaluable when moving forward.
Our staff at Bad Credit MD has assembled a list below of answers that was researched by our staff to some commonly asked questions.
How can I repair a bad credit rating?
Explains what steps you can take to remove negative items from your credit report and improve your credit score.
Where can I get approved for a unsecured credit cards with bad credit?
A list of unsecured providers who will provide credit cards for bad credit.
Where can I get a secured credit cards with bad credit?
View a list of prepaid credit card providers and the benefits.
Where to get a prepaid credit card?
A list of secured credit card providers for people that do not qualify for a unsecured credit card.
I need a car loan but my credit score is low?
Explains how and where to obtain a a car loan even with a past bankruptcy.
How can I get a free copy of my credit report?
Explains how you can obtain a free credit report annually from all three reporting agencies required by the Federal Trade commission.
Where can I file a compliant about a creditor harassing me?
Learn your rights under The Fair Debt Collection Practices Act if you are being harassed by creditors.