What is Bad Credit

A credit score is what financial institutions rely upon in order to process your requests for things such as credit cards, car loans, mortgages, or personal loans. Your score consists of several factors that impact it in varying ways. Bad credit is seen as the low end of the financial totem pole, a score of between 350 and 475.

Credit scores fall in between 350 and 850, with anything above 740 being considered excellent. A bad credit score definitely hampers your ability to secure loans with moderate interest rates, so it is imperative to tweak your credit score for the positive if credit is something that you will need in the immediate future.

Bad credit is the terminology utilized by credit card conglomerates and other financial lending institutions to describe an individual that has exercised poor financial management. The methods of determining someone to be in possession of bad credit can derive from making late payments, skipping payments altogether, exceeding credit card limits, defaulting on payments, or declaring bankruptcy. These are the typical behaviors that deem an individual to be high risk, and, subsequently, have bad credit. 

The duration of bad credit is dependent upon whether or not your transgressions are rare or frequent. Some credit no-no’s can linger in your credit history for years, while others may only temporarily hinder your ability to secure credit without too much duress.

When lending institutions are contacted by an individual that is hoping to obtain credit of some sort, there are myriad factors and checks that occur in an attempt to ascertain whether or not the candidate is worthy of the loan. First and foremost, the applicant’s past borrowing and repayment schedules are scrutinized, and their credit score rating is perused with a watchful eye. 

A person with bad credit is not a commendable applicant since the financial institution may not see a positive return on their initial investment. This is why people suffering from bad credit have a hard time surmounting this obstacle. 

Many individuals that suffer from bad credit have built up this reputation through a series of ill-advised fiduciary actions. A person that makes late payments on a regular basis does not seem to be a desirable person to conduct business with, considering their irregular remittance history. This goes hand in hand with skipping payments altogether. The individual seems unlikely to pay back their loan, so they appear to be high risk, and if they are granted any credit at all, it normally is combined with a very high interest rate. 

Exceeding credit card limits is another way that a person can be considered to have bad credit. People that exceed their limit exercise poor financial judgment. One of the major factors in determining a person’s credit score rating is their utilization ratio, which simply refers to the amount owing as a percentage of their available credit limit. If this number exceeds thirty percent, red flags begin to rise. If you have maxed out this credit card, you are treading on some very thin monetary ice. 

Prior to declaring bankruptcy, many individuals will try anything to doff themselves of the label bad credit. When this form of financial trouble lingers, applications for balance transfer cards and other quick fixes climb rapidly. The more places that you apply to for credit or loans, the more high risk you are painting yourself to be, which is frowned upon by the lenders that be more often than not. 

Bad credit is a detriment to your purchasing power and future ability to borrow money. This can prove rather costly when you are trying to secure a car loan or take out a mortgage. The vicious cycle of bad credit will continue to rear its ugly head if you are constantly saddled with high interest rates due to your past financial history. Take the proper steps to improve your credit in the eyes of the credit bureau, and you will notice a big change in your personal finances. 

Ridding oneself of the shackles of debt can help you get out of the quagmire of debt, and begin to see a positive side to borrowing money when needed. If you are uncertain about your credit score rating, find it out promptly by visiting annualcreditreport.com and learning whether or not you are seen as having bad credit. If you are, take the appropriate steps to raise your rating. Learning how to properly budget your money in a responsible manner will allow you some flexibility when it comes to borrowing money, and repayment will be much easier.

 Being considered to have a bad credit rating will follow you for numerous years, so it is in your best interest to take corrective measures in this regard. This can help to ensure that you are seen in a more favorable light in the eyes of the distributors of those little plastic rectangular wallet stuffers that allow you to revel in the instant gratification society in which we all currently reside.

Tidy up all of your financial mistakes, and get that credit score rating to hover in a comfortable range as soon as possible.