How does bad credit affect you?

by Joy Mali Writer When the credit bureaus first developed credit scores, they served as a tool for lenders and financial institutions to make a quick evaluation of a client's risk regarding indebtedness. Over the years, more people began looking at credit scores as a way to evaluate not only credit worthiness, but also the reliability of an individual. Now, a good credit score can impact your life in ways that you probably never considered before.

Your Credit Report

Your credit report and score are valuable tools that you may use to improve your life. Understanding the basics of what a credit report contains and how a credit score is calculated can help you in nearly every aspect of your life. “How does bad credit affect you?” is something everyone should ask and understand. When you find that you are serious about improving your credit score, you should order copies of these reports regularly so that you can see how you're doing. If you end up with a low score, don't be worried, as you can get a credit card for bad credit scores.

The information in a credit report can be divided into five primary groups. It's from these groups that your credit score is developed.

• Payment history- This accounts for 35 percent of your overall credit score. This section looks at how reliable you are in paying your debts on time. If you are late or have missed a payment, that might affect this portion of your credit score.

• Credit account longevity- The age of your credit accounts may affect your credit. Those accounts that are older will improve your credit score, while newer accounts might actually hurt it.

• Inquiries- Every time you apply for credit, an inquiry is sent to the credit bureaus to see how good your credit is. If several of these inquiries have been made in a short period of time, your credit score may be lowered.

• Credit mix- The credit bureaus prefer to see a wide range of credit types. If all of your credit is based on line-of-credit type accounts, such as credit cards, your credit score may be lower. Having a mix of store credit, car loans, credit cards, and mortgages might improve that score.

• Amount owed- This is another big portion of your credit score. Thirty percent of your credit score is derived from comparing how much you owe with your total credit limits. If you are no more than 30 percent of your credit limit, your credit score will reflect favorably. If, however, your credit cards are all maxed out, your score may be negatively impacted.

At Work

Your job is important to you. In some jobs, your credit score can impact your ability to be promoted. When it comes time for selecting who will get that next promotion, many employers are reviewing more than just your work history. They will often conduct background checks to look for criminal activity and driving records. They also check your credit history. If you're looking for a new job, it is also a common practice for employers to screen new-hire candidates prior to making a job offer.

At Home

Aside from the obvious credit worthiness that couples are concerned with, there are other areas that you might not realize are impacted by your credit score. Many insurance companies are using credit scores as a measurement for determining premiums rates and eligibility for certain types of policies. If you are a renter, your next home or apartment application may come with a request for a credit check. One of the latest trends involving credit scores is on the dating scene. It is to the point now where some people want to see your credit score before accepting that second or third date. Credit score dating is even becoming a routine part of life for some people.

Your credit report can affect your life in so many ways. Getting a copy of your credit report on a regular basis can help prepare you for making improvements to your credit score and also on your dating card.

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Created on Dec 31st 1969 18:00. Viewed 0 times.

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