Many people find the option of purchasing items on credit very attractive.
This can be very helpful in certain circumstances. For example ‘buy now pay later’ enable people who have no free cash to buy larger items such as sofas or electrical goods to get the items right away without paying for them straight away, you would pay for them at a later date or the option is often there to pay it in instalments over a set period. These payment plans can be great as long as you stick to the payments or don’t forget that you need to pay back the initial amount by the set date. If you miss payments or fail to pay the full amount on time it’s easy for the payment amount to rise substantially in a short amount of time. There will be interest added and late payment fees. If you are going to go ahead and use one of these plans then you need to ensure you can make the payments or you could get into financial distress.
It’s things such as the above that can affect your credit score. Having a poor history of reimbursing back your borrowings makes it more problematic for you to borrow in the future. This is why it is so important to keep track of everything and make your payment on time.
Put simply bad credit is the consequence of making poor financial choices one after another. If you borrow money whether it’s a loan or store credit or credit card it will be assumed that you are going to pay it back one way or another. Whether it has been set up via monthly instalments or paying back the total by a set date. This was the condition that you were allowed to borrow the money/given the credit in the first place and it’s vital you stick to this agreement, otherwise your credit score will be affected. Furthermore not sticking to this means you will incur further fees. It is very important to only apply for a loan when there aren’t any other routes otherwise you risk putting yourself in a worse financial position. To put it frankly having a poor credit history deems you to be ‘untrustworthy’ by lenders as you aren’t someone who is seen to be a good person to lend to as it may be unlikely that you will make the repayments. Therefore you may not be someone they will allow to have a loan or credit or if you are approved you will have a much higher interest rate than someone with a good credit rating.
The best way to begin to get back on track is to make arrangements to pay off existing debt. It may take some time but you could eventually reach a place where you have a good credit rating once more.