- Personal Finance
People With Bad Credit-The Adverse Effects of Credit Scores on Personal Life
Understanding the Concept of Credit History
We consider certain people as good and some as evil. Sometimes, we form such opinion about other people without aware of doing so. Normally, we came to such conclusions based on their personality. Nowadays, getting to know people personally is becoming a far fetched thing. Everyone is busy in their own world, getting too close with too many people is not possible. The question here is, in such a living condition did you ever consider a person to be good or bad based on their credit history?
Credit history is a reliable record of a person’s or companies past borrowing and repaying. It also includes the information about the unpaid borrowings, late payment and bankruptcy. In advanced countries, the systems are such that anyone can track down the credit history of individuals easily with the unique identification code number. Even the credit history of companies also can be tracked down easily. This information is used by the lenders to determine the applicant’s credit worthiness. Credit worthiness implies an individual’s willingness to repay a debt. The willingness to repay debt is assessed by the analysing how timely the past repayments of debt have been made by the person under consideration. However, the willingness to repay the loan is only one of the determinant in the decision of lending. The main determinant is the ability to repay, that is the income of the person in consideration. Analysing the credit history of a single person itself is considerable work. In order to simplify the problem, the credit scoring is adopted. The credit history, with the help of algorithm is expressed numerically which is called credit scores. Hence, if a particular having more than a particular amount, he will be treated as one with a good credit history and vice verse.
Bad Credit or Adverse Credit
Adverse credit history or a bad credit history is a negative rating, which is often proved as undesirable to lenders and other extenders of credit. With bad credit, you'll have trouble renting or buying a house or will have to pay higher security deposits to get your utilities turned on, and pay higher premiums on your insurance. That's just a few of the ways bad credit affects you. Bad credit can affect, not only your finances, but your life in various ways. Many people don’t realise that bad credit not only means higher interest rates and more monthly fees, but it can also keep you from getting a job or advance in your current job. A poor credit history can adversely affect your cost for cell phones, electricity, natural gas, jobs, apartments, insurance, gyms and other memberships and can be denied many other services.
How You Accumulate Bad Credit
There are a lot of things that might leave a negative impact on your credit history. You may feel like neglecting a bill, or your credit statements, but you should keep in mind that it might bear an adverse effect on your credit history forever. So however busy you are, make sure you meet the bills on time. The following are some of the things that create this negative impact on your credit history.
- Late payments
- Skipped payments
- Exceeding your credit limits
- Declaring bankruptcy
- Tax liens
- Errors in your credit report
- Identity theft
What to think of people with bad credits?
One of the
most common misunderstanding is that people with bad credit are bad
people indeed. This perception might be wrong sometimes, as people
have different reasons for getting in debt over their heads. Some
people lose their jobs, some incur huge medical bills, people get divorced
and left too much of debt, etc. The persons with bad credit could
be bad with money management or unlucky to fall on such situation, that
does not necessarily mean they are bad in their personal life.
But from the point of view of a lender, they want to ensure the repayment
of their money, so dealing with people with bad credit is a bit risky
for them. They will simply say no to the applicant on safety measures
or will charge more interest as a reward for the risk they are undertaking.