What Is Bad Credit

Often, we think of credit as either good or bad, with little room in between. While we generally define credit as either good or bad, there is a well-defined scoring system that provides us with a grade of either good or bad for each borrower. This means that you can have bad credit, just like Joe Soap, but your score can be better than his and you would subsequently benefit more from your score than poor old Joe. Let’s take a look at how credit scores work and what makes credit “bad”.

How is my credit calculated?
There are three credit bureaus that calculate your total credit score. These bureaus keep a record of your credit history, known as your credit file. They use this file and its contents to determine whether you are a responsible borrower and whether lenders should invest in you. This is not, however, a black and white system, which is why the many factors that affect your credit contribute to an overall score and not a simple “yes, borrow this person money” or “no, do not borrow this person money” system. There is a lot you can do to improve your score and conversely, a lot that you can do to hurt it. 

Why do I need good credit?
Credit opens doors and opportunities that would otherwise be inaccessible. When you have good credit, you can borrow money to assist in purchasing goods and services of all kinds. Lenders that recognize your good credit will also provide you with lower interest rates and preferential terms. Lower interest rates mean lower total repayments, which equate to considerable savings in the long term. You may qualify for credit, however, with a poorer score, your terms will be less than favorable, which is why having bad credit or even somewhat average credit is unfavorable. 

What are the effects of bad credit?
Whether you are purchasing your dream truck or financing your forever home, more often than not, you will require credit to do so. Unfortunately, most individuals do not have the financial capacity to make large purchases on their own and, in these cases, lenders can assist in lessening the burden of costly acquisitions. When your credit is bad, you will find it hard to get any new credit, or that the terms of your credit are not conducive to your long-term financial health. For the same reason, you may also struggle to get new accounts, such as store accounts or phone contracts. 

Can bad credit be fixed?
This is a question that we get asked frequently and the answer may relieve some of your stress – YES! You can absolutely fix bad credit, though it is not an easy feat. By understanding what affects your credit (visit our page, “What affects my credit score?” to find out more about this) you can work smarter and begin to target areas that previously affected your score adversely. To further improve your score, you can seek the help of a top credit repair company, such as Credit Repair Services, Military, Fort Hood Killeen TX. We find and rectify issues within your credit report and ensure that you do not suffer as a result of unfair credit filing.