What does "Bad Credit" mean?

What does "Bad Credit" mean?
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The mail man comes in only to carry the bad news that your application for a mobile phone contract has been disapproved due to your bad credit history. How come and why? Find out what bad credit means and understand its implications below:

Bad credit and having no credit at all are completely two different things. Bad credit involves being unable to keep a good track of your financial records, while having no credit means that you have not committed any financial transaction before. The latter is much easier to fix than the first one actually. Because when you have no credit, all you have to do is apply for a new one and eventually build credit out of it. But if you have a bad credit history, it will take a long process in order to expunge it.

How do you Attain Bad Credit?

There are a number of possible causes for bad credit. Some examples are as follows:

  • Not paying the bills on time
  • Non-payment of your bills
  • Convicted of fraud, among other law violations
  • Obtaining public records such as IVA, DRO and bankruptcy
  • Incomplete or incorrect details from your credit file
  • Bad credit is commonly caused by your bad habits towards your debts. You might have mismanaged your accounts or have made wrong financialdecision, which may involve opening accounts, paying your creditors, or sticking with the credit limit allotted for your plan. Not paying on time and/or at all canaffect your credit score definitely.

    Some things may also be out of control. For example, you didn’t have full control over your financial problems like someone made the wrong choices for you. Being victimized by fraud or identity theft makes perfect sense for this matter. Another is when the credit company has suffered technical errors on their database that they’re unable to update your information or keep track of your financial transactions.

    How does Bad Credit affect your Mobile Phone Contract Application?

    Others think that maintaining a good credit standing is only needed when you apply for a loan. But it’s not. It is important to remember that your credit standing may also have an effect on your future transactions. For instance, when it comes to housing loans and utility bills like mobile phones, creditors may use your credit standing to evaluate your ability to handle and manage your finances. Apparently, if you’re able to do so, there’s no reason why a creditor must turn down your application.

    What Should You Do?

    While it is difficult to convince creditors in approving you a loan or a contract, there are options available to make things a bit easier for you. Below are some tips that will help you improve your credit rating:

    Begin Paying Your Bills on Time

    One effective way of showing creditors that you are really serious about getting back on track of your financial goals is by starting to pay your bills on time. Although it will not erase your bad credit ASAP, it will eventually build up your standing and create a good impression, which matters most with financial companies. Make this a habit and see significant changes in 6 to 12 months.

    Commit to a Debt-Free lifestyle

    As much as possible, avoid acquiring new debts unless you have fully paid the previous ones. Not only will this help you recover, but it can also save you from committing far more errors in your financial decisions. This is definitely a good sign that your creditors would want to see from you, as you are becoming financially responsible.

    Avoid Outstanding Balances

    If you have to use your credit card for anything, make sure to settle the balance in full. Do not leave some balances that will acquire more interests. It can just prolong your difficulty in handling finances and recovery. Do not take more charges that will eventually put you down again.

    Make Sure to Contact Your Creditors

    Treat your creditors as your trusted financial partners in order to make yourself comfortable with the idea that you can reach out to them and let them know your financial status. It’s the thought that you care about your debts and your willingness to make things right will let them feel at ease. You may also consider arranging new payment terms with the creditor to make everything realistically manageable for you.

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