What Does Bad Credit Mean for Your Finances?

What Does Bad Credit Mean for Your Finances?

Bad credit can make things very difficult for an individual, as it is something that can be challenging to recover from. This is particularly true when you factor in that you may be unable to borrow money due to a poor credit score - a catch 22 situation. So, what exactly does having a bad credit rating mean for your finances?

Side-Effects of Bad Credit

If you have a bad credit score it is unlikely that you will be able to borrow money as you will be viewed as a high risk borrower by lenders. If you are able to borrow money, this often comes with very high-interest rates which can then be difficult to afford. The trouble is many people need to borrow money at key moments in their life such as buying a house, paying for a wedding, buying a car or starting a business. A bad credit rating can also make it difficult to get certain jobs or even open a bank account.

Banking

Banks want to know that their customers will be able to pay back any money that they borrow, which is why it is hard for those with bad credit to open an account. Fortunately, there are some bank accounts available for people with bad credit which will usually charge a monthly fee. Despite the fee, these can be a good option for people with bad credit as it can be a way to build your credit score through paying bills on time or avoiding entering an overdraft (if you have one), for example.

Mending Your Score

It is much easier to damage your credit score than it is to mend it, but it is not impossible and there are many ways that you can build your score in addition to having a bank account and making your payments on time. For example, getting on the electoral roll, using a credit card little and often and repaying in full, closing old accounts, checking for mistakes on your file and looking for fraudulent activity.

Having a bad credit score is a serious problem and it could interfere with your life. This is because it could stop you from being able to borrow money or even open a bank account, but there are accounts for those with poor credit which can be a great way to take steps to improve your score - this can take time, but it will prove to be worth it in the end.

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