Most people have found themselves in a financially disadvantageous position at one point or another in their lives. In many cases, this will result in your credit score taking a significant hit. This can put you in a desperate position with bills piling up, leading to a need for a payday loan from a reputable lender. This is why you should always be vigilant and make sure to take actions necessary to avoid finding yourself in financially compromising positions. Here are some of the most common ways you may find yourself with a bad credit score.
Only making minimum payments on credit cards
Although it may seem like making your credit card payments on time should be counted as a good thing, when it comes to calculating your credit score, it does not guarantee a strong credit score. It is true that making a payment on time instead of a late payment is always better. However, only making the minimum payment has its own risk that you should be aware of.
Timely payments are indeed the largest factor in determining credit scores, however, the second largest factor in determining credit scores is the usage of debt compared to a person’s total allotted credit limit. Most financial experts suggest maintaining your debt usage to 30% or lower of your credit limit. Ideally, you should maintain debt usage to around 10% or less. Therefore, if you are using a larger percentage of your credit limit while only making the minimum payment it can result in a lower credit score.
Lost track of outstanding bill that goes into collections
It is not uncommon when people move residences that they end up losing track of some things along the way. Sometimes some bills are lost in the shuffle and end up not being paid. These bills can end up being forgotten for several years, resulting in a collection account on your credit report. You may end up discovering the forgotten bill when you try to apply for a loan.
One common cause of a bad credit score, which people generally do not think about, is financial infidelity within a marriage. Many times in a marriage, one spouse ends up running up a couple’s debts without the other spouse knowing. This can make it difficult to obtain a loan when you really need it because your spouse has used up all of your credit limit on frivolous spending.
Identity theft and errors
Your credit score can take serious damage if there are errors on your credit report, or if you have your identity stolen. This is why it is important that you regularly check your credit report and your credit score. If there is anything strange going on, it will show up in your credit report. If you catch it in time you can take actions to correct it.
Fixing bad credit
If you find yourself with a bad credit score all is not lost. There are proactive things you can do to fix your credit score. The first thing you should do is dispute any negative information currently on your credit report. Secondly, you should start to rebuild your credit history by paying your debt payments as scheduled. This will mean taking on smaller amounts of credit card debt or other types of loans, such as a personal loan from Blue Trust Loans. However, you should be careful to make sure the debt amount is manageable. If you continually make payments on schedule, this will eventually improve your credit score. There are bad credit installment loans available to help get on your feet.
Making ends meet
On the other hand, before you start rebuilding your credit you may have to take care of short-term bills which may be piling up due to your current financial difficulties. Since your credit score is damaged, it will likely be difficult to obtain a loan or another credit card to make ends meet in the short term. However, there are still reputable lenders which will give you a personal loan with flexible terms to make sure you can make ends meet.