If you're wondering what's the difference between having a good credit score and having a bad one, you're not alone. According to experts, what makes a bad credit score? It all depends on what you intend to use your credit for. The five main credit categories that affect your credit score are payment history and amount owed, credit history, credit mix, and length of credit history. Each category contributes a percentage to your overall score.
Bad credit scores can have serious consequences
A bad credit rating can negatively impact your life in many ways. First of all, it will make it more difficult to get loans or to receive credit from lenders, and you'll be required to pay higher interest rates. A low credit score will also make it more difficult to find a job and to rent an apartment. Also, you will have trouble getting utilities installed and obtaining a car loans. Furthermore, you will likely face higher auto insurance rates and, in some states, higher health insurance rates. Potential employers will also notice your poor credit score.
There are ways to improve your credit rating. You should not open any new credit lines. Although it is not a good idea to open new lines credit, it is important you maintain a balance between different types of credit. Keeping your credit mix diverse will show lenders that you can manage your finances.
Here are some ways to increase your credit score
Maintaining good credit scores is possible by paying on time. In the long term, missing one payment could result in a drop in your credit score. There are many steps you can take in order to pay your bills on time. The factors that affect credit scores include your payment history as well as how much credit and how much debt are owed.
It is a great idea to reduce your credit card balances to 10% or less. Keep in mind, however, that being close the limit can affect your credit score. Instead of moving your debt to another card, it is best to pay off your debt immediately. Although it might seem counterintuitive, this is a good way to increase your credit score.
It is a good idea to not open any new credit accounts. You could be subject to a hard inquiry and lose your credit score if you open new accounts. Furthermore, opening new lines credit can decrease the length and importance of your credit history.
A debt consolidation loan for bad credit
Bad credit can make it difficult to get a loan consolidation. There are many ways to improve credit scores. Within six to twelve month, you will start to notice improvements in your credit score. Bankruptcy is an option for people with poor credit, but it should be the last resort. A professional credit counselor is available to help you determine if bankruptcy might be the right option.
There are several different types of debt consolidation loans that you can apply for. The credit score requirement will vary between lenders. Most lenders require that your FICO be at least 600. Some will even accept scores as low at 580. To be eligible for the best loan, you need to regularly monitor your score. Numerous online tools and banks allow you to easily check your score.