5 Guaranteed Steps to Bad Credit
2009-05-17 by Lee
2009-05-17 by Lee
Developing bad credit is easy, while maintaining good credit is significantly harder. Your credit cards and the credit bureaus tend to be quite unforgiving, and if you engage in any of these five actions, then you will most likely suffer from bad credit. The key to maintaining good credit is to avoid any of the elements highlighted on this list:
1. Too many accounts
Opening too many accounts in a short timeframe will certainly drop your credit score. When you apply for four to five credit cards at the same time, this raises a red flag to creditors - indicating that your financial stability is at risk, and thus, you need funds immediately.
Each time you apply for a credit card, you receive an inquiry on your credit report. These inquiries are cumulative and will impact your credit score, potentially placing you in the bad credit range. In fact, having too many credit cards is the most common problem with people who have bad credit.
2. Late payments
Making sure that you pay your bills on time is very important. If you miss a bill, not only will you be charged with late payment fees, but your credit will suffer. Just one late payment can send you from good credit to bad credit, and thus, it is critical to send in payments before the due date.
Bad credit can be fixed, and paying on time is a critical step in repairing bad credit. If you consistently have outstanding payments on your record, then this does not bode well for your long-term score. Late payments will always send a signal to lenders that you spend beyond your means, indicating that you will not pay back any future loans or credit card debt.
3. Non-payments
Failure to make your payments is the fastest step to bad credit. While late payments and too many accounts look bad on your credit report, non-payments are the epitome of bad credit. Keep paying on your accounts, even if you can only afford the minimum payment. It is important to keep money flowing to creditors to keep them and your credit report happy.
4. Borrowing for every purchase
To thwart bad credit, you may occasionally want to pay with cash. High balances on credit card accounts can drop your credit score by a few hundred points. It is important to keep debt spread out amongst creditors in order to avoid having bad credit. The key to bad credit is too much credit - which is a factor to keep that in mind when you are looking at the newest gadgets.
5. Bankruptcy
Filing for bankruptcy is worse than having bad credit. Bankruptcy means you have no credit. While non-payments or late payments stay on your record for just a few years, bankruptcy will stay with you for the next ten years. Bankruptcy will ruin your credit and your ability to borrow in the future. Bad credit is nothing when compared to a borrower who has filed bankruptcy. Credit card companies, such as American Express, will not issue credit again until your debts have been paid off. Bankruptcy leaves a permanent black mark on your creditworthiness to lenders, and it should be your last resort.
These are the five key steps to developing bad credit. Following this list practically guarantees a bad credit score, high interest loans, and the inability to borrow. Thankfully, avoiding these five actions can build your credit score - and indeed, you can fix your bad credit with some effort and conscious work.
1. Too many accounts
Opening too many accounts in a short timeframe will certainly drop your credit score. When you apply for four to five credit cards at the same time, this raises a red flag to creditors - indicating that your financial stability is at risk, and thus, you need funds immediately.
Each time you apply for a credit card, you receive an inquiry on your credit report. These inquiries are cumulative and will impact your credit score, potentially placing you in the bad credit range. In fact, having too many credit cards is the most common problem with people who have bad credit.
2. Late payments
Making sure that you pay your bills on time is very important. If you miss a bill, not only will you be charged with late payment fees, but your credit will suffer. Just one late payment can send you from good credit to bad credit, and thus, it is critical to send in payments before the due date.
Bad credit can be fixed, and paying on time is a critical step in repairing bad credit. If you consistently have outstanding payments on your record, then this does not bode well for your long-term score. Late payments will always send a signal to lenders that you spend beyond your means, indicating that you will not pay back any future loans or credit card debt.
3. Non-payments
Failure to make your payments is the fastest step to bad credit. While late payments and too many accounts look bad on your credit report, non-payments are the epitome of bad credit. Keep paying on your accounts, even if you can only afford the minimum payment. It is important to keep money flowing to creditors to keep them and your credit report happy.
4. Borrowing for every purchase
To thwart bad credit, you may occasionally want to pay with cash. High balances on credit card accounts can drop your credit score by a few hundred points. It is important to keep debt spread out amongst creditors in order to avoid having bad credit. The key to bad credit is too much credit - which is a factor to keep that in mind when you are looking at the newest gadgets.
5. Bankruptcy
Filing for bankruptcy is worse than having bad credit. Bankruptcy means you have no credit. While non-payments or late payments stay on your record for just a few years, bankruptcy will stay with you for the next ten years. Bankruptcy will ruin your credit and your ability to borrow in the future. Bad credit is nothing when compared to a borrower who has filed bankruptcy. Credit card companies, such as American Express, will not issue credit again until your debts have been paid off. Bankruptcy leaves a permanent black mark on your creditworthiness to lenders, and it should be your last resort.
These are the five key steps to developing bad credit. Following this list practically guarantees a bad credit score, high interest loans, and the inability to borrow. Thankfully, avoiding these five actions can build your credit score - and indeed, you can fix your bad credit with some effort and conscious work.
