You may have been told that you don’t qualify for a mobile contract at the time because you have bad credit. But what does it actually mean and what does it stand for? Find out below.
Bad credit is completely different from having no credit. Bad credit means you’ve made financial actions in the past that prove to be detrimental to your credit worthiness, whereas having no credit simply means you haven’t started building your credit history yet. While the two may have the same negative effects on your new applications for loans or utility services, having no credit is a lot easier to fix than having damaged credit. When you have no credit at all, all you need to do is to start getting one and open new accounts gradually, whereas when you already have poor credit, the bad records contained are not that easy to erase.
A lot of factors may contribute to bad credit, such as the following.
Most of the time, bad credit results from your conscious behaviour towards your debts. It involves the way you handle your accounts, open new accounts, make payments to your creditors, and use the credit limit that is allotted. Being late on your payments consistently and defaulting on your loans are sure fire ways to hurt your credit score.
Sometimes though, bad credit may also be caused by factors that are outside of your control. Sometimes, you experience financial struggles through no fault of your own. In some cases, you may be a victim of fraud, where someone else may steal your credit information and use it in all the wrong ways. Other times, bad credit may be caused by errors on the part of the credit referencing agencies who keep track of your financial activity.
Some people may think that having good credit is only important when you’re looking to borrow money. However, your credit actually plays an important role in basically every aspect of your life, such as shopping for insurance, finding a place to live, and even in applying for utility services, such as a mobile phone contract. Your credit is like an extension of who you are with regards to your finances, and thus can make or break your application results.
When you have bad credit, you are often viewed as lacking the financial responsibility and even the resources to meet what you promise to pay for. It’s more of a trust issue with most providers, seeing you as a potential threat, or a high-risk individual that should never be entertained.
It’s definitely hard to convince someone you will be keeping up with your bills when you’ve broken a lot of promises in the past, so one of the things you should focus on is to fix your mistakes. Here’s how:
This is the first step for that big change you are hoping to achieve. While this alone will not boost your credit, and should take quite some time before it picks up, it is a sign that you are making up on past mistakes and are serious about getting back on track. Do this consistently and you will definitely see an improvement in six months to a year.
Unless absolutely necessary, avoid taking in newer debts until your old ones have been paid off, because it will just make it even more difficult to recover. We know it’s extremely challenging to tackle old debts you’ve already put into the back burner or maybe even planned to forget permanently, but an obligation is an obligation. Don’t just expect them to fall of your records by ignoring them altogether. Your future lenders and providers will be pleased to know you are finally taking some action and facing your past problems courageously.
If you ever did have to use your credit cards again, make sure to pay your bills in full every time. Making only the minimum payments is simply delaying the inevitable, and it will only rip you off a large amount of cash over the long haul. Do not charge amounts you know you cannot meet in time because it will send your debts rolling over on interests once again. Additionally, carrying balances over will only hurt your credit more.
If you find your debts extremely difficult to handle, then at least make an effort to call your creditors, letting them know that you still intend to pay. If you’re cooperative and courteous enough, they’ll likely be willing to adjust your repayment terms so you can afford them. This may even help you fix those accounts that were reported as defaults or those sent to debt collection agencies.