Bad credit has become such a common occurrence that many consumers have stopped trying to make the necessary changes to improve their circumstances. With so many product and service options for individuals with less-than-stellar credit, most assume that their financial status no longer impacts their everyday lives. Although you can still secure a loan, credit card, home, or car with bad credit, it costs you more than you realize. Continue reading to learn more.
Higher Interest Rates
Payday loans, cash advances, and credit cards for bad credit will automatically result in higher interest rates. When you have a credit score of 650 or lower, lenders and creditors label you as a high-risk borrower. That means the likelihood of you paying your debt is low. Therefore, banks, lenders, creditors, and service providers will charge you more interest. Ultimately, you could end up paying hundreds of dollars more for a loan or credit card than someone with an excellent credit score.
Larger Deposits
Some products and services require a deposit or down payment to acquire. Service providers will charge you more when you have bad credit to reduce their risk of loss. Landlords will ask tenants with less-than-stellar credit scores to pay several months of rent in advance. When securing utilities, buying a car, or even applying for insurance, you’ll be required to pay a more significant percentage to accomplish your goals.
Low Limits
Another downside to bad credit is low spending limits. Lenders, creditors, and service providers are in danger if they extend large sums and don’t receive a return on their investment. Therefore, you may not be able to secure the amount you need. Although you may need $1,000, you may only get approved for $500. Consequently, you’ll have to find another avenue to make up for the difference.
Fewer Options
Bad credit also limits your options as a consumer. There will be some things that you can’t access because of your financial situation. You may find your dream home for $300,000 but can only get approved for a $150,000 mortgage. You may want a brand-new Mercedes Benz, but your credit may only qualify you to purchase a used, non-luxury vehicle. Ultimately, your bad credit can cause you to settle or compromise on the things you want and need most.
Emotional Distress
Last but not least, poor credit leads to emotional distress. You’re paying more to sustain a decent quality of life, and your options are limited, causing you to settle when you desire more. Bad credit causes you to miss out on lucrative opportunities and experiences and the consequences can trickle down to your love and family life.
Improving Your Credit
Hopefully, learning the downside of living with bad credit has convinced you to make some changes. Before you file for bankruptcy, fall deeper into debt, or pay a debt relief company to improve your circumstances, give these DIY credit repair tips a try.
DIY Credit Repair Steps
- Review your Transunion, Experian, and Equifax credit reports. One of the most straightforward DIY credit repair steps is to check your credit reports. Consumers can review these reports annually for free by visiting annualcreditreport.com or using other free and affordable platforms to review and monitor their credit more frequently.
- Address delinquent accounts. Contact the creditors or lenders to discuss your repayment options to resolve or reduce your account balances. Inquire about financial assistance programs, flexible payment plans, and incentives like lower interest rates and fees. When completing this DIY credit repair step, don’t agree to a repayment option you can’t afford. It’s better to pay $5 a month and show good faith than to commit to $100 a month and fall behind.
- Dispute inaccuracies. Are there accounts on your credit report that you don’t recognize? Perhaps you’ve already resolved the matter, but the creditor hasn’t reported the updates. Whatever the case is, you can dispute inaccurate information by filing a complaint with the credit bureau. A dispute letter requires creditors and lenders to verify your debt obligations, update payment history, or remove resolved accounts.
- Develop healthy habits. Your credit will never improve if you continue to make the same mistakes. Therefore, you should develop healthy financial practices like budgeting, saving, and debt management. Use technologies like online bank accounts, budgeting apps, and financial management courses to help you improve your relationship with money.
Bad credit is not the death sentence it once was. Consumers can still acquire everything from credit cards to mortgages with less-than-stellar credit. Be that as it may, poor credit still has a lasting impact on your quality of life. Ultimately, consumers are encouraged to use DIY credit repair tips like those listed above to get their finances in order.
