How to Survive with Bad Credit

                                                                               

Due to the recession and recent government shutdown some Americans have bad credit. If you have bad credit you will probably be denied for credit. However, there are some companies that may give approval but it will be at a high cost. 

Being in debt affects your credit score either negatively or positively.  If you pay your bills on time you credit score will increase, if you don’t it decreases.  Seventy-nine percent of all credit reports contain at least one error and 75% of all credit reports contain one major error which can lower your credit score.    

Bad credit is a score usually 670 or below but varies depending on the creditor.  Bad credit prevents you from getting approval for a student loan, mortgage loan, business loan, or personal loans.  Bad credit affects:  getting hired for a job, interest rates, terms and conditions, getting capital to start a business, insurance rates, renting, ability to generate wealth, ability to get access to programs tailored to those with good credit, affects your relationships and credibility with service providers and employers and thwarts you from achieving your financial goals.

Bad credit and being in debt can also cause you to lose focus, cause anger, anxiety, stress and health issues.  Debt can affect relationships with friends, family or your spouse.  One of the biggest causes of divorce is due to finances.  Paying down debt can eliminate those negative feelings and improve your relationships as well as your credit score.

Using credit is a balancing act and most Americans don’t balance it very well which is evidenced in the amount of debt owed by Americans and their low credit scores.  If is crucial that you pay back any debt owed starting with delinquent accounts, especially if you plan on applying for credit in the future.  Paying down debt also prevents legal action taken against you for an outstanding debt.

Some creditors assume that if you have bad credit you may be irresponsible in other areas of your life such as taking care of an apartment or showing up for a job, committing crimes, etc. If you are looking for a job a potential employer may see you as a security risk because you may be more likely to commit a crime, steal from the company or commit fraud.  This is usually not the case for those looking for work and is unfair but is the norm for some employers.

If you have bad credit you may pay hidden fees, are more likely to be a victim of predatory lending, may have to pay upfront fees and have no negotiating power and have take what is offered to you.  If you have bad credit you need to reevaluate your spending habits. Pay down debt as soon as possible to help increase your credit score and improve your financial future. Don’t let your credit hold you back.  Order a copy of your credit report at least once a year from the 3 major credit bureaus: Experian, Equifax, and TransUnion at annualcreditreport.com or call 877-322-8228. Here are 14 effective tips to help you when applying for credit or a loan with bad credit:

1. Know your credit score - beware of predatory lending, fraud and scams based on your low credit score when applying for a loan or credit card
2. Pay – pay for all items with cash, checks or money orders or prepaid cards
3. Cash payments - do business with companies that accept cash payments
4. Secured - apply for a secured credit card www.bankrate.com
5. Renting – look for vacancies in the newspaper or Craigslist who may be more lenient with those with bad credit
6. Mortgage – provide a 20% down payment or use manual underwriting which can be costly due to higher fees and interest rates
7. Car – purchase from a private lender or classified ad, buy used vs. new, large down payment
8. Cell phone – get a prepaid phone from company such as T-Mobile or Sprint
9. Employment – not all employers view your credit report, notify a potential employer of any issues, specific industries may automatically deny you employment
10. Get help - get a co-signer to sign for a loan or help you obtain a credit card
11. Entrepreneur - start your own business if you can’t find a job
12. Banking - get overdraft protection to avoid bank fees and prevent reporting in bad check systems such as Chek Systems or Tele Check
13. Credit union - get credit union financing which may be more willing to work with a customer versus a traditional bank
14. Alternative financing – use Peer to Peer Lending with sites such as: Prosper, Zopa, Dwolla, Lending Club