If you are talking about credit, or essentially the level of trust potential lenders have that you will repay money you have borrowed, you could be falling off very bad credit somewhere on a scale, meaning no one will borrow you money, In the outstanding loan, where banks and credit companies practically ask you to borrow. Most people are somewhere between these two extremes.
Define Bad Credit
Bad credit generally describes a record of past mistakes with keeping payments on your loan contracts, inability to get approved for new loans. It usually means you haven’t paid your credit and other commitments on time, or haven’t paid them at all. Your credit report also takes into account public records such as any state or federal tax lien, bankruptcies, or judgments against you.
Companies called credit bureaus (also known as credit bureaus) collect your credit history and compile it into a credit report. Each agency maintains its own report and your credit history and scores may vary among them due to errors or omissions. Although you will see the records and history for all of your current credit accounts on your credit report, you will not see a credit score on your credit report.
Each credit bureau calculates a FICO score based on your credit information. The Fair Isaac Corporation (FICO) developed the software and algorithms to calculate this score; therefore the name.
Different companies such as auto lenders, mortgage lenders and credit card companies book potential borrowers differently according to their needs so that they cater to dozens of FICO score variations and calculations. Credit scores range from 300 to 850, with 650 to 670 being considered the lower end of a “good” credit score and indicating lower scores, always lousy credit.
Having a lot of negative records, late payments or possibly a credit default on your credit report can undoubtedly result in lower credit scores. If you’ve had accounts sent to a collection agency, such as unpaid medical bills, the collection agency could report your delinquency to the credit bureaus, even if the hospital doesn’t.
Bad credit often results when people go through a rough job financially, triggering more negative events in a short period of time like high balances recently charged on credit cards, bankruptcy or having a vehicle repossessed. Some negative events only happen once, such as a tax lien or real estate foreclosure, to help lenders cautiously work with you.
The fallout from Poor Credit
Once you have bad credit, lenders are less likely because of the increased likelihood of you borrowing that you might fall behind on any new credit card or loan account. You could find all of your applications finding credit denied, or if you do get approved, you will probably get a much higher interest rate than borrowers who have good credit scores.
The increased interest rate is one way lenders borrow for the risk of balancing money you borrow.
Bad credit affects more than just your credit card and loan approval and interest rate. Some insurance companies consider your credit score when you quote an insurance rate. Utility and cell phone providers often require a deposit for applicants with bad credit. Landlords ask for a higher deposit if you have bad credit, or they can refuse you entirely for a lease or lease.
Check your status and FICO scores
If you usually stay on top of your finances, you can get a decent idea of where your credit score falls. You know if you’ve been late on all loan payments lately, or have large credit card balances that don’t exceed 30 percent of available credit.
If you’ve had recent credit applications, you’ve raised your credit card interest rates, or your card issuers have lowered your credit limits, take these things as a sign that your credit score is on the way down.
Find your FICO credit score and get a copy of the latest information reported on your credit record. You could find out that one of the credit bureaus has not recorded an account that has a positive payment history, or you could even find errors that have unnecessarily lowered your credit score. You can get a free copy of your credit report every year from any of the three credit bureaus, Transunion, Equifax and Experian.
Having your credit report checked will help you find out what your credit score is hurting. The Federal Trade Commission (FTC) has authorized only one website, AnnualCreditReport.com, to provide these reports. You can also get free estimates of your FICO score by signing up for one of the many credit monitoring websites.
Many of them offer a basic account with FICO scores from one or two of the three credit bureaus for no fee. You don’t need to spend money to find out what is causing your bad credit. Many of these sites also have credit score simulators that show you how much your credit score could move or pay down accounts to open new accounts and other changes.
Take steps to fix your bad credit
Bad credit doesn’t have to last forever. You can take steps to improve your credit score over time. First, focus on removing negative information from your credit report either through a credit report hassle or through a credible credit repair technique.
Also, the effects of some negative marks on your credit report decrease over time, so sometimes all you have to do is wait and see. Focus on adding positive information to your credit report by adding new accounts and consistently paying them on time.