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The credit score is a simple three-digit number, but it is probably one of the most important numbers in any American’s financial life. It ranges from 300 to 850 and the higher the number, the better your credit score. It is important to know the use of bad credit loans.
A good credit score can make your financial life a lot easier. It allows you to get approval for almost any type of loans easily. These include mortgage loan, college education loan, credit card, etc. Besides, the interest rate you receive will be one of the lowest available, which means a huge saving to you.
Thus, it is important to understand the impact of loan in the credit score and what you can do to ensure that it all works in your favor:
1. Your record of paying loans
Your ability to pay loans is important to lenders and one way to see if you got that ability is to look at your payment history. If you pay your loans on time, this is a good indication that you can handle your money well. Lenders will likely view you as low risk to them.
One or two late payments may not hurt your credit score much, but a dozen of them will put a huge dent in your score.
2. The amount of money you owe
The total combined debt from a credit card, mortgage, auto loan and other loans are being considered here. But revolving debts (from credit card and line of credit) deserved a closer look.
Revolving accounts have an upper limit, and the closer your debts are to the limit, the more your credit score will suffer. It is advisable that you use less than two-thirds of the available credit limit.
3. How long do you have credit?
In general, the longer you have credit, the better it is for you. There are exception cases where you can get good score even with a short history. But most of the time, longer history has a more favorable impact on your score.
4. When was the last time your applied for a loan?
Opening a new account can bring your credit score down, especially if you ask for a lot of credit within a short span of time. Applying for ten credit cards in a month will be more detrimental to your score than if you do it over time.
Applying for credit loans also gives lenders a chance to inquire about your credit report. When there are too many inquiries into your credit history over a short span of time, your credit score will take a dip fast. As bad credit report can significantly impact your life, so it is too important to understand how bad credit impact personal life.
5. What type of credit do you have?
To get a good score, having a good mix of credit is beneficial. Besides credit cards, you may have other loans like auto insurance, mortgage or personal loan, which can bring a positive impact on your credit score as long as you have managed them well.
Although it is advisable to start building a good credit score as early as possible, it is never late to get your credit score fixed even if you have a poor score now. If you are having bad credit now, focus on making payment on time and control your expenditure while you learn the ropes of repairing your credit.
A bad credit report can significantly impact your life. However, before we discuss the effects of bad credit and it can influence your lifestyle, it is essential to first understand what a credit report entails.A credit report is a detailed compilation of your credit history and is typically prepared by one of three primary credit-reporting agencies – Equifax, Experian and Trans Union. The details of the report are generated through creditors who have granted you loans. These would include landlords, hospitals, banks and other financial institutions.The instances of bad credit may involve delayed clearance of medical expenses, rent, mortgage or other utilities. You may have at some time overdrawn your bank account, or failed to make your credit card payment on time. In such cases the respective creditors will report this information to any one of the credit agencies. This will result in your credit report being blemished with negative marks. Having analyzed the reasons for bad credit, let us now discuss the effects of bad credit.
In the event that you need to buy any insurance policies such as health, life, accident, medical etc., the presence of bad credit will require you to pay higher premiums. Since employers do regular check ups of the credit histories of their employees, it is imperative that as an employee your credit report is not hindered by the effects of bad credit. A negative report can prove to be detrimental for your career progression.So also for new job applicants, a negative or bad credit report will prevent them from getting a job of their choice.
The effects of bad credit can even translate into your personal life where getting loans for major purchases may become difficult. And if you do get the loans, you might land up paying exorbitant interest rates. Even with a tarnished credit history it’s possible for you to obtain a bad credit loan.
The cost of bad credit can prove to be very high. It is important to keep the credit report error free. Whatever situation you are in life, applying for a new job, hoping to grow in an existing one, needing loans, paying mortgages, or dealing with lenders, it will demand an inquiry into your credit history. Therefore to avoid bad credit on your credit report, it best to manage your finances wisely from the beginning.Having bad credit may impact your life in more ways than you think. The most common effect is the difficulty in obtaining low rates on loans, mortgages, lines of credit, and credit cards. With bad credit, you may be approved for a loan or credit account, but chances are you will be subject to lower credit limits and higher interest rates for the balances you accrue on your accounts. This, over time, can cost you more money, which can create more financial problems in the future.
Having a bad credit rating can also affect job opportunities in certain fields of work. Keep in mind that when you apply for a job, the employer needs your permission to run a credit check by law. The Fair Credit Reporting Act states this, and it is a violation of that act if your credit is checked without written consent. However, a good deal of finance careers will check your credit, primarily if you will have access to large cash amounts at your potential job. Examples of such positions are bank tellers, financial officers, mortgage brokers and even high-end jewelers. The thinking behind the credit check is that a person with bad credit may pose themselves as a risk to abuse the power in their position (i.e. steal money, accept bribes, or conceal or hide jewels.)If you are applying for any of the above job opportunities, you will want to be prepared to discuss your credit report should the subject come up. If your potential employer advises you that they will be running your credit report, be upfront and honest about any questions they may have. Once they run the report, the information will be right in front of them, so do not try to deceive them. You see, in this instance, the credit check is not so you can be approved for a line of credit, it is rather a survey of how you handle debt, whether you are responsible for your finances, and perhaps even to see if you are carrying too much debt for the salary they may offer.
If you ran into a bad credit situation recently (or maybe not so recently) be prepared to explain it. Maybe your financial struggles are as a result of an accident and you were out of work for some time. Perhaps you were the victim of identity theft and were unaware. Whatever the case may be, your honesty (or lack thereof) may be a deciding factor. It is important that you are prepared to face credit report inquiries with complete honesty.If you happen to be in a bad credit situation, take charge of your credit standing and realize that you can change it. If there are some discrepancies on your credit report, credit repair may be the answer. You can get these items disputed and investigated. Anything incorrect or that cannot be proven will be removed from your credit report. Financial relief si the most important issue in here.
If you are still trying to work down existing debt and it seems to be getting out of control, debt negotiation may be your way to go. You or professional debt negotiator can negotiate a reduced amount from your original outstanding balances allowing you to pay down your debts faster.There are different methods and lots of help out there so you can start your bad credit repair.Keep in mind that if a potential employer sees that you are making an effort to get back on track, this initiative may sway them into hiring you, regardless of your credit score. Do not miss out on a job opportunity because of bad credit. Do all you can to get them to count you in.
Even with a tarnished credit history it’s possible for you to obtain a bad credit loan, in fact, they are just for people in your situation. With this ever changing financial market, there are always new ways to lend and borrow money. Even though it’s best to come to the lending table with a good credit history, it can also be done with a bad one too, and the main setback you’ll come across will be the higher interest you’ll be charged. It is also important to know how bad credit loans and secured loans are interrelated.
So, What’s the first step in obtaining a bad credit loan? Well doing the research both online and offline as to where the best place for you to get the loan from, and then filling out their loan application. Since there is no need to offer up collateral with this type of loan the lender will look at you as higher risk and like I’ve mentioned before, they’ll charge you a higher interest rate to offset that risk.
Since most personal loans are based solely on the good credit rating of the borrower, those who have a good credit history can get a loan more easily than those with a bad credit history. But do not dismay, because it is possible for someone with a roughed up credit history to obtain this type of loan too. It might just mean that you may not be able to borrow as much money as your “good credit history” counter-part.
The smartest way to use a bad credit loan if you have a poor credit history is to consolidate all you debts with it. But if you need to, it can be used to pay for such things as new appliances for your home or to cover educational expenses. Or if you need money between paychecks to make ends meet, this type of loan can help.
No matter how you use it, a bad credit loan can get you through any tough spots in your financial journey. The good news is by consolidating your debts you’ll often get a lower interest rate overall than what you were paying individually on those debts. By doing this and by making your payments on time, you’ll not only help build a better credit score, but you’ll also be satisfying all your creditors.
Well, we’ve covered the importance of a good credit score, but we’ve also talked about how it’s possible to get the money you need through a bad credit loan regardless of your tarnished credit history. We’ve covered the best ways to use your loan and how it can help your credit score to make payments on time. If you’re smart, you can really make great strides in improving not only your credit rating but your quality of life.