Credit Scores With Bad Credit
Credit Scores With Bad Credit. Whenever you go to the bank to ask for a loan, they will always look at your credit scores. Now if you’ve never borrowed money from anyone before then you can ignore this article because you’ll probably pass their credit assessment with flying colors. But if you’re like everyone else who survives the day-to-day and month-to-month expenses because of your credit card, then read on. This article will tell you all about Credit scores and what it means to be labeled as someone with bad credit. It’ll explain why banks are so stingy with their money when you ask for a loan, and most important of all, this article will give you a couple of tips on how to slowly get yourself out of bad credit.
What are credit scores anyway?
Credit scores are basically numerical representations of a person’s level of debt. It tells banks and other financial institutions how reliable you are when it comes to paying your loans and their interests. Your scores are based on your previous loans obviously, and there are multiple institutions called credit bureaus that collect and compile these scores. They then send this out to banks and other lenders or even to you if you want a copy, and these are used to assess how likely a person is to default on their payments.
What do these scores mean to you?
If you have a lot of debt and you’re just barely making your interest payments, you will get very low credit scores. If your scores are low, you can’t get a loan because lending institutions won’t trust you. If they do loan you some money, they’ll most likely ask for a large collateral and/or increase the interest rates for the loan. They do this in order to cover the risk that they have to take by lending to someone with bad credit scores, you.
Now if your credit scores are high, that means that you’re unlikely to default on your loan. This makes lenders happy and they’re more eager to negotiate a loan with you. They’ll even give you better terms and will be more lenient when it comes to extension or modification of said terms later on.
I have bad credit, what should I do?
If you’re like most people who have to deal with bad credit, don’t worry too much. It’s a bad position to be in but it’s not a hopeless scenario. Here are a couple of tips that can help you get better scores.
Pay your debts – yes, it’s that simple and that obvious. Don’t go looking for some magical remedy that will dramatically increase your scores. Pay your credit card bills and you’ll see an instant boost.
Stop borrowing money – again, another no brainer. You’ve already got bad credit so why would you make it even worse?
Stop using your credit cards – we’ve become so dependent on these that we often forget that it’s actually ok and ideal, from a credit rating point of view, to pay everything with cash. Even if you pay your monthly bills regularly, the balance between months can still get reported and cause your credit scores to fall.
Get an installment loan – I know it sounds contradictory to everything I’ve said so far, but this can help, provided that you make sure you pay the loan regularly. Find a lender who reports to the major credit bureaus and improve your scores, by showing them that you can pay your debts.
These “quick” fixes should help you out if you’re planning to get a loan some time soon. Again, don’t think they’ll miraculously boost your scores, they won’t. But they might be enough to get you better terms on that loan that you need. At the end of the day, the only way to get out of bad credit is to settle them and avoid them. A bit of credit can be practiced from time to time, but always limit your liabilities to a level that you can financially handle.