Much like the way bad grades in school can affect your chances of receiving acceptance into your favorite university or landing your dream job, your credit score can determine whether you can take out a car loan or rent a home. After graduation, it’s almost as if your credit score is your new grade point average, with the ability to make or break your financial future.
Your credit report is an evaluation of your credit history, which takes into account how much money you owe, whether you pay your bills on time, the length of your credit history, and the kinds of credit cards you use. If you’ve exhibited poor financial habits, more than likely you’ll receive a low credit score. The lower your credit score the higher risk you are considered to lenders, insurance companies, landlords, utility companies, and other services that handle money payments. Essentially, your bad credit makes you a liability because based on your credit history, you are more likely to miss payments.
However, just because you have a poor credit score does not mean you’re forever barred from applying for a loan or receiving emergency money. There are options available for those struggling with bad credit scores.
Understand Your Credit Report
First consult the three credit bureaus, Experian, TransUnion, and Equifax, which are each required to provide you with a free credit report each year. Use these reports to better understand your score and double check that there are no errors.
If you notice a mistake, contact the credit bureau and the vendor who reported the issue. You don’t want an error in your report to prevent you from financial freedom, so follow the trail and don’t give up until you receive answers!
When you’re coping with debt, interest rates, and fees on top on your normal bills and payments, it may feel like your finances are spiraling out of control. Fortunately, there are financial advisers and credit counseling organizations out there who are willing to offer you advice.
These outlets can help advise you on debt consolidation or repayment plans so that you can get a better grasp on handling your money. They can also provide you with tips on ways to rebuild your credit.
Rebuild Your Credit Score
You are not forever stuck with a below average credit score because it is possible to repair your credit score, slowly but surely.
Applying for a secured credit card is one option available for those dealing with poor credit reports. A secured credit card company requires you to pay a fee, which it will use as collateral if you don’t make your payments on time.
Typically, the card issuer will report your credit history to the credit bureaus, and if you make your payments on time, it may even bump you up to an unsecured card. While these cards can help you positively build your credit, if you are tardy on payments, be prepared to pay high interest and fees.
Apply for a Bad Credit Loan if it is an Emergency
In the case of a one-time emergency, you can apply for an easy payday loan even if you have poor credit. While these bad credit loans can supply you with fast cash to pay for your medical bill or your car repair, keep in mind that high interest rates and expensive fees are associated with these loans as well.
If you must turn to a cash advance, read all of the terms of the loan agreement, plan to pay back the loan in short order, and only use it for a life emergency. Do not allow yourself to use an easy payday loan for non essential purchases like shopping sprees, airplane tickets, or vacations.
Borrow from a Relative
Depending on your financial situation, you could consider turning to relatives for help. Your family members may be less likely to charge interest, and if they do, usually it will be lower than what other institutions charge. Agree to create a contract with details concerning the details and terms of the payment and due date. Just as with the other options of borrowing money, honor this agreement and plan on repaying on time.
While bad credit scores can have a negative effect on your financial opportunities, there are ways to overcome the implications of a poor credit report.
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Category: Money Basics