You might have experienced a financial low at one point. It is common for people to make bad financial decisions and find themselves in a situation where they are unable to repay their debts or home loan. You probably know what it means to make bad purchases. How does bad purchases reflect on your credit standing? Well, it is important to be cognizant with what affects your credit standing and how. The answer to that question will depend on the type of bad purchase in form of home loan you made.
How bad purchases affect your credit standing
30-40% credit utilization is appealing to credit evaluators. Big purchases affect your credit utilization negatively in a sense. While making big purchases might not affect your credit score significantly, it will not work to your favor. Using up all your available limit portrays an over-reliance on borrowed money, something lenders don’t like. It portrays that in case of a financial turbulence, you won’t be able to service your loans and bills. However, you could counter the big purchase effect with paying it off quickly. If you pay your big-ticket purchase way before its due date, your credit standing will stay intact.
Bad purchases could also make you fall behind on your credit card repayment. You should take notice of the consequences that follows falling behind or even defaulting. Defaulting on your credit score comes with more severe consequences as compared to late payments. While late payments could be handled by an increase in interest rates or a late fee charge, defaults could make you get listed in a credit bureau. If you default on your card for more than 3 months for an amount exceeding $150, you are likely to be listed in a credit bureau and the report remains in their records for five years.
Along with the listing, your credit score reduces considerably and financial institutions may not extend loan services to you. If you are in that situation, you could still seek bad credit personal loans. It is prudent to make your purchases wisely; make the ones your finances can handle.
How to change your bad credit history
While you might be looking for a shortcut to a great credit standing after experiencing a bad credit score, there is no better way to start than trying to get rid of your negative credit report information and settling your past due bills. You will, however, need to go beyond this to start getting loan services.
Get new credit accounts
While it might seem difficult to regain your good credit history, it is not. First, start by getting new credit accounts. You get back into the game. That will enable you to start rebuilding your credit. As much as many financial institutions could refuse to give you a credit card, some will. However, be vigilant not to land on a credit card with extortive interest rates that could see you back to square one. In addition, prepaid credit cards are not a good option for rebuilding your bad credit. It is definite that your applications will get denied a number of times, but you should keep going.
Improve your credit habits
Obviously, you will get nowhere with the financial habits that got you to the bad credit situation. Change your financial habits and become a bit more responsible with credit. Don’t charge what you can’t afford. Live within your means. Most importantly, stay below your credit limit and pay your credit card bills fully on time.
Meet your payment deadlines
Your payment history is very instrumental in rebuilding your credit. You don’t want to fall behind on credit card bill payment if you are to get to a good credit status.
Go for good credit
Put your good credit habits into practice and develop a habit. Demonstrate to financial institutions that you are now credit conscious and you’re determined to build a good credit score. One advice that you should take to heart is not to get too many credit cards to allow for easy management.
A good credit history can get you a home or car loan
It is without a doubt that you will get attractive offers of loans, that is if you have built a good credit history. You should develop habits that will boost your credit history before you buy. It all begins by figuring out your finances. Understand your credit because it could open doors to success.
Article Submitted By Community Writer