While it can seem unfair in some cases, credit scores serve a useful purpose for money lenders such as banks when deciding on whether to lend money to someone or not. If you have a poor credit rating, banks will see this as a sign to not trust you with repayments, and this could reduce your chances of being able to take out a loan.

However, there are ways in which you can increase your score over time and ways around the problem altogether. We’ve put together a list of essential things you should know about having a poor credit score and what you can do to remedy this.

What Causes A Bad Score?

First and foremost, the cause of a bad score is primarily down to failing to repay loans on time. This includes everything from overdrafts and phone contracts to larger bank loans and even mortgages. The more instances of failed and late payments you accrue, the more your credit rating will drop.

This score can be seen by any lender after a soft or hard check and will give them an idea of whether or not to trust you with another loan. Sometimes a late payment isn’t always our fault, and a one-off instance won’t impact your score much, especially if you rectify it hastily. Your score essentially shows when you have a habit of being late on payments, and a pattern here will put lenders off very quickly.

The Impact Of Bad Credit

As mentioned above, bad credit is going to affect your ability to borrow money and secure certain payment contracts in the future, and this negative mark can last for a significant period of time. Having bad credit is not something to be taken lightly as it can even impact your ability to find somewhere to live, whether purchasing or renting too.

In less common circumstances, if you were applying for a job role that involved significant money management, then the background check they do may be a red flag, affecting your chances of getting the job. There are other minor things that your bad credit can influence, too, such as the ability to get a phone contract.

Use Poor Credit Services

If you have bad credit, then it’s not the end of the world. While you’re striving to build up your credit, and you’re serious about using good money management from now on, then you may want to consider lenders and other services that are more lenient when it comes to working with those who have bad credit.

A lot of lenders understand that a poor credit score isn’t necessarily an accurate depiction of your ability to manage your money, and unexpected circumstances can cause your credit score to drop. You can even get bad credit mortgages from Money Nest, for example. It can be frustrating if you know that you can make repayments and are in a much more financially stable situation, but your bad credit history feels like a ball and chain around your leg. This is where these bad credit brokers come in handy, working on your behalf to find a lender that is willing to work with you.

Build Up Some Credit History

It’s important to search for ways in which you can build up your credit score for the future, and there are a number of useful ways in which you can do this. It may seem counter-productive, but borrowing money is the best way to do this. For example, you can get yourself a credit building card, which is simply a credit card with a limit that is affordable for you. You can then use this credit card for general purchases throughout the month and then pay that debt off on time to show that you’re able to manage your money well. Regular borrowing and repayments are going to slowly build up your credit, and the more you use the card, the better.

Avoid Late Payments

When it comes to your other debts and loans that need to be paid off, it’s imperative that you remember to pay these off on time. While missed payments are very bad, a simple late payment, even by a few days or even hours, can be just as bad if it happens a lot. Set alarms and reminders to make sure you make your repayments as promptly as possible otherwise, your credit score isn’t going to improve and will likely start to drop too.

Remember that your score will drop much faster than you’ll be able to increase it, especially once the damage has already been done. A great way to manage your finances is to use a budget planner, writing down the dates of your monthly payments. Whether they’re bills or loan repayments, and ensure that you have enough money set aside for each of these before you start spending money on luxuries and non-essentials.

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