Although only a small a number of people in the United States have a terrible credit score, a surprising number has a plain-old, bad credit score. What exactly qualifies as a bad score, you might ask. Technically, anything between 580 and 619 officially qualifies as a low score according to PCI.
As Fox Business reports, credit bureau Experian recently released a study which estimates that nearly 30% of Americans have a bad credit score. What’s even more alarming, some people have no credit at all, which is equally bad as having a low score.
How Bad Credit Can Affect Your Life
Some people, especially the younger ones, don’t give much thought to their credit scores. If you don’t start taking your credit rating seriously, you’ll not only be unable to get a credit card with a low-interest rate, but you might run into a few more serious problems…
● Increased interest rates
More than 55% of people in the country rely on a loan to buy a car. If you’re stuck with a bad credit score, most lenders won’t work with you. And few of those who will accept to work with you regardless of your credit score, will probably charge you a much higher interest rate.
● Lowered chances for a loan
Although more than half a million new companies emerge every month, starting your business from scratch is not an easy job. If you’re thinking about starting a business, you’re naturally going to look for a loan. Just keep in mind that your credit rating will affect your eligibility for financing.
● Fewer business opportunities
Aspiring entrepreneurs aren’t the only ones affected by their credit scores – it can easily affect your professional life. A recent Demos survey revealed that roughly 10% of job candidates lose a job opportunity because of their credit score.
How to Improve Your Credit Score
● Watch your credit card balance
Possibly the biggest factor in your score is how much revolving credit you actually have versus how much you’re using. If you want to keep a good credit score, you should aim for 30% or possibly lower. If you have a number of credit card balances, you should look into bad credit loans to help your score.
● Start paying bills on time
This is pretty obvious – one of the main ingredients in a good credit score is a month after month of paying bills on time. In some cases, people sacrifice on-time payments in order to scramble money for a new car or a new home. But if you start neglecting your bills, it will certainly damage your credit score.
● Leave old debt on the report
Many people believe that old debt on their credit report is a negative thing. And as soon as they pay off their home or car, they get on the phone in an effort to remove the debt from their report. But this is actually good for your credit because this constitutes as “good debt,” and the longer your history of good debt is, the better your score will be.
The Bottom Line
Some experts argue that so many people have bad credit scores due to the lack of financial education. In fact, a research paper released by the Council for Economic Education showed that only 20 states in the country require their students to attend economics class. Moreover, only 17 states require personal financial education.
However, you cannot blame the education system entirely if you have any credit problems. After all, it’s up to you to take the matters into your own hands and improve the situation. The tips we gave you above provide a good starting point. You should do even more research, and if needed, get some professional assistance to help you improve your credit score.