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Your credit score last year may not be the same it is this year, for many reasons. Credit scores are what lenders, insurance companies and, it's reported, even potential employers look at to determine your ability to work and pay your bills. While you may pay your bills on time, if you lost your job due to the downturn in economy, that is a negative that will affect your ability to get a new job and ultimately...your credit score. Fortunately, you are supposed to be able to get a copy of your credit report free, once every year.
It's sad in that there's a double edged sword, so to speak. if you lose your job due to downsizing or company closures, you are less attractive to potential employers. Why? If you lost your job, it had to be your fault in some way due to negligence on the job or less diligence that other employees. In other words, why YOU and not someone else? By not having a job, you are less likely to be able to get financing or loans due to an apparent inability to pay them back.
As the search for jobs stretches from days to months, the inability to continue to pay monthly bills strikes with the lack of income and guess what? The missed payments start affecting your credit score. Even if you are making your minimum payments, the credit card companies can (and will) reduce your credit limit which then reduces your credit score! If you haven't gotten your free credit report, it really is something you should get to make sure it's accurate.
For those who are self-employed, unemployed or underemployed, a decrease in income can create a credit card dependence that can eventually make the debt to income ratio (or the amount of debt versus your income) too high. When your balances start reaching the ceiling of your credit limit, that's an indicator that your are struggling financially. You may feel the need to open a new credit card, but that is another way of reducing your credit score if you get turned down for it. Any credit check, authorized by you, for credit cards,, other loans, etc., that ends up being denied is another decrease in credit score. Which is of course, another bad indicator to lenders or just about anyone who will look at your credit score that you are not a good credit risk. One of the few benefits to being denied credit is that you are able to get a free copy of your credit report. When you are denied credit, the lending institution will send you a letter stating what agency they used to get your credit information. All you need to do is call (or order online, if available) and get your FREE credit score. Look it over and make sure there is nothing out of place on there.
Your credit score last year may not be the same it is this year, for many reasons. Credit scores are what lenders, insurance companies and, it's reported, even potential employers look at to determine your ability to work and pay your bills. While you may pay your bills on time, if you lost your job due to the downturn in economy, that is a negative that will affect your ability to get a new job and ultimately...your credit score. Fortunately, you are supposed to be able to get a copy of your credit report free, once every year.
It's sad in that there's a double edged sword, so to speak. if you lose your job due to downsizing or company closures, you are less attractive to potential employers. Why? If you lost your job, it had to be your fault in some way due to negligence on the job or less diligence that other employees. In other words, why YOU and not someone else? By not having a job, you are less likely to be able to get financing or loans due to an apparent inability to pay them back.
As the search for jobs stretches from days to months, the inability to continue to pay monthly bills strikes with the lack of income and guess what? The missed payments start affecting your credit score. Even if you are making your minimum payments, the credit card companies can (and will) reduce your credit limit which then reduces your credit score! If you haven't gotten your free credit report, it really is something you should get to make sure it's accurate.
For those who are self-employed, unemployed or underemployed, a decrease in income can create a credit card dependence that can eventually make the debt to income ratio (or the amount of debt versus your income) too high. When your balances start reaching the ceiling of your credit limit, that's an indicator that your are struggling financially. You may feel the need to open a new credit card, but that is another way of reducing your credit score if you get turned down for it. Any credit check, authorized by you, for credit cards,, other loans, etc., that ends up being denied is another decrease in credit score. Which is of course, another bad indicator to lenders or just about anyone who will look at your credit score that you are not a good credit risk. One of the few benefits to being denied credit is that you are able to get a free copy of your credit report. When you are denied credit, the lending institution will send you a letter stating what agency they used to get your credit information. All you need to do is call (or order online, if available) and get your FREE credit score. Look it over and make sure there is nothing out of place on there.
While it is extremely easy to lower your credit score, it's extremely difficult to raise it. You may have had a difficult few months or even years and missed a few payments. Nowadays, that's not uncommon, but that still is going to affect your credit score. Particularly if you have debt that has gone to a collection agency. That is a huge red flag to anyone looking at your credit history that you have a history of not paying your responsibilities. You may feel justified in not paying the bill (erroneous billing, overinflated charges, etc.), but the fact is your credit history will be negatively impacted. Not only that, it will take a long time for your credit to build back up again. Even if you pay off the collection, it will remain on your credit history for 7 years.
It may be tempting to get all the offers from various stores to open their brand of credit card, but it has the potential of being a negative on your credit report. Too many credit cards with unused credit is also a negative in that you have the potential to use the cards and build up more debt. Be sparing with your credit cards and don't open new ones just for the sake of the store's gimmick. Having credit cards with a long credit history is better than closing them and opening new ones for the sake of having new credit. Chances are, the closed accounts will still show up on your credit score. Again, by getting a credit report, you should be able to see what lines of credit, balances, etc., are on your report that may be negatively (or positively) impacting your credit.
In short, don't rack up a lot of credit card debt. Manage your money responsibly and if you are having a difficult time making payments, get help from your credit card company, mortgage company or from whichever debt you're having difficulty with at the time. Some credit card companies will put a “freeze” on the account where it can't be used in exchange for a lower interest rate for a fixed period of time. The assumption is that your circumstances will improve and in the meantime payments will be reduced to (hopefully) more manageable amounts.
This list is by no means comprehensive and each person's situation is different. If you feel overwhelmed, first talk to your credit card, mortgage or loan companies to see about making reduced payment options. Make sure, if you do, that it won't further affect your credit rating.
598 is a bad Credit Score. Get your Latest Score
What is a Bad Credit Score?
So What! I Have Bad Credit, What's the Big Deal?
It is a big deal. Unless you never plan to apply for a loan (car, house, or credit card, etc.), you are going to need a good credit score. While there are some that argue credit scores are just a way for banks to charge people more money, it's a fact of life in today's world. A good credit score should not be taken for granted because once it drops, it can negatively affect your life. As mentioned previously, it has become more common for potential employers, insurance companies to check your credit score. What happens if they don't like what they see? You could pay more for insurance and end up losing out on your dream job. A stunning 3/4th's of the country has mistakes on their credit reports, which can negatively impact their credit score.
Uh Oh. What Happens Now?
If someone wanted to borrow money from you, but you knew that they never repaid or had problems repaying other people they borrowed from, would you want to lend money to them? Chances are, you wouldn't. That's the way lenders feel about low credit scores. Low credit scores, for the most part, didn't just happen because of paying bills on time and not overextending credit. They happened due to people not paying their debts. Credit scores are a way of putting people in different categories based on their past ability (or inability) to pay their debts. If you have a credit score of 800 and above, you are in the minority. Just over 1/10 of the country has a credit rating this high - and this group has the lowest default rate (inability to pay debt). On the other hand, at the other end of the spectrum are those with credit scores of 300-just under 500. These people have a history of taking money and not repaying it. Almost 90% of the people in this category default on their loans and credit lines. Then there are those in the middle who pay their bills on time, but may have too much debt to income which keeps them lower than they would be or they may have erroneously missed a payment at some point.
501-600 = F
601-700 = D
701-800 = C
801-900 = B
901-990 = AAs stated above, be aware of what's on your credit report. Make sure there are no mistakes that could negatively impact your credit score. If there are mistakes, be prepared to push to get it corrected! You are the one with your credit on the line.
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