Growing up you probably were warned about the dangers of having bad credit. Truth to be told it seems there’s no biggest financial fear in the eyes of most people than missing a payment and ruining their credit score. Ultimately it is important to keep a healthy credit score and to avoid contracts or other financial compromises that we can’t uphold. But what does exactly happen when we get a bad credit score for some reason?
Today we’ll go over some of the main misconceptions regarding our credit score, and also explain how you can get past it. Because the most important thing to remember is that our credit scores are not static, and it’s a situation that can always change around.
As we mentioned above credit is not something that remains fixed and a stain that never goes away. In fact on a general level, it’s not like any company looking at your credit score will even know what cause it to go downwards, all they look at is a number.
What we commonly call a credit score is an average that considers our payments in a certain amount of time. Payments delivered on time add to the number, while late payments and other inconveniences detract from it. So, our behaviour can always improve it and change the average for the better.
Improving our credit score might sound hard at first but think about it like this: You were born without a credit score. Your credit score became a thing when you started making routine payments for a payment you made in dues, or when you got a phone plan that required monthly payments. We all start neutral, and this means that getting a good credit score is something we regularly manage over time. We just need to plan for it accordingly.
This might sound too obvious at first, but it all comes down to making sure your next payments are due in time. Since credit is an average, it means that all successful payments add up to it. And since it’s just an average most companies won’t go in detail past the number, you just need to reach back a healthy number.
Of course, we understand that finances aren’t that simple, and sometimes there’ll be more overdue payments in our future. But there are certain tips we can keep in mind to improve on this front. Cut down on all payments that are unneeded as soon as you can, the fewer chances of overdue payment the better your numbers will look overall. And find something you can reliably pay on time even if it’s not that expensive, preferably it won’t be.
One of the simplest examples to explain how credit scores work is phone contracts. Pay on time and your score will go up, pay late and you’ll see it going down. Phone contracts are one of the first ways most people build their credit score, and precisely due to this they tend to be more lenient when it comes to credit.
Just like phone contracts are relatively easy to get when your credit score is just starting, it’s also possible to get bad credit phone contracts. Something that we tend to forget is that credit score is an average that only means something for companies, and standards will vary from company to company.
So even if your credit score is seen negatively for certain things like a house loan, it might just be perfectly fine for a phone contract. There are places that can help you find a bad credit phone contract. Similarly, it’s possible that one phone company will turn you down and the next one accepts you. Some companies even have a focus on these clients since they are an important market.
This is great for various reasons. First and foremost our mobile phones are a basic commodity nowadays. We need our phones for almost everything from communication to even banking. And on the other hand, as we said phone contracts are a very straightforward way to generate a positive credit score. So these contracts are great for our day to day lives and to improve on our situation as well, it’s just a win-win.
So when it comes to a bad credit score just take a deep breath and remember that it changes. It changes with every single action we take, and we can improve on it steadily as well.