A credit score is simply a numerical representation of how well-established your credit score is, and whether you have a good credit history. So if you have bad credit, you may not even have a credit score, which means that you haven’t got any credit activity the credit companies can use to make a credit score estimate.
1. Reasons Why You Have A Bad Credit Score
Here’s a closer look at some of the reasons why you may not have bad credit and why you may want to consider improving your credit score, rather than settling for a bad credit score forever.
Probably the biggest reason someone has a poor credit score and is not able to make large purchases is that they have been paying higher interest rates on their balances. If you know that you’re going to be paying higher interest rates, you’ll want to start improving your credit score right away.
The second most common reason people don’t have high credit card balances is that they don’t use their credit responsibly. If you want to open a credit account, you need to follow all of the basics. Start paying off those high credit card balances and reduce your credit utilization ratio, so you’ll have a better chance of getting approved. If you do get approved for a new card, try to pay the entire balance as soon as possible, or as soon as possible after the introductory period ends – this will help you get lower interest rates as well as lower monthly payments.
Another reason you may have a bad credit score is late or non-payment of your bills – for instance, if you have a history of making late payments to your Met-Ed or water bills then it can affect your credit. To avoid this you may want to consider making automatic payments to make sure all future payments are on time
2. Rebuilding Your Credit
Bad credit can make many life’s financial hardships much more expensive and difficult to overcome. If you are paying high-interest rates on your credit cards or are having problems making the mortgage payment each month, bad credit may be keeping you from achieving your goals. Fortunately, it is entirely possible to regain good credit and rebuild your credit score. In fact, the process of rebuilding credit is much simpler than most people believe. Good credit can even make all the other financial aspects of your life easier as well.
The most important step you need to take in order to rebuild your credit scores is to assess the damage that bad credit has inflicted on your finances. Simply put, by assessing what your score looks like right now, you will be able to see where you stand and where you need to go in order to improve. If you know that your score is dragging your finances down, the first thing you should do is take a close look at your credit utilization ratio. The ratio is the number of credit card or loan balances you have versus the total amount of money you have in available credit now.
By reducing the amount of credit card debt you have by at least 20 percent, and getting rid of any outstanding loans or credit card balances you may owe by a certain percentage, you can drastically increase your available credit score and your credit utilization ratio. Once you have done this, you will have accomplished two things. First, by reducing the amount of debt you have, you will be able to pay more of your bills each month. This means that your credit score will increase, and second, by reducing your credit card balance, you will be able to pay down your debt, which will also increase your credit score. By combining these two important steps, you will be able to quickly move forward and rebuild your credit scores, which will allow you to enjoy better access to affordable credit in the future.
3. How To Save Money While Working On Your Credit
Cash or credit? Credit or no credit? which comes first, the money you save or the money you borrow? Most people think they must save up first before using credit to finance their purchases, to prevent debt from accumulating.
Although it is impossible to avoid debt completely, a good strategy for handling your money and creating a more comfortable financial future is to use credit cards only for emergencies. That way, you don’t build up a mountain of debt that you cannot repay. A good plan for using your emergency fund consists of three key elements: a savings goal, a savings and spending plan, and a proper budget. When you have these three elements in place, you can be sure that your money is working for you and not against you, while building your emergency fund.
A savings goal is simply how much money you plan to save for the future. For most people, the saving goal will be achieved through reducing expenses and increasing income. Your income plan should be clearly defined because you will need to know if extra money is coming in, and where it is coming from. The spending plan should be carefully thought out, identifying both the expenses you plan to incur and the income that is coming in to make those expenses possible.
