Having bad credit can affect a person in many ways. Having bad credit can prevent one from getting a job or a loan. Bad credit does not happen instantly, but rather develops gradually. Many people suffer from bad credit because of financial difficulties. Here are some of the factors than can cause bad credit.
Debt
Millions of people have more debts than they can possibly pay off. The rising cost of living contributes to bad credit. When the cost of living goes up, and the paycheck does not, many people turn to credit cards to purchase items. Some of these credit cards have high finance charges which can add up really fast, making it difficult for some people to pay their monthly balance.
Late Payments
Making late payments on a credit card causes bad credit. Each time a payment is late, it is reported to the credit bureaus. Lenders are more likely to lend money to someone who has no late payments on their credit report than to someone who had late payments in the past.
Delinquency
Another reason for bad credit is delinquency. It is always wise to contact your bank or credit card company if you are unable to make a payment on time. Past due payments will eventually go into collections, which can negatively impact your credit score.
Overlimit
Going over the credit limit on a credit card can cause bad credit. When a credit limit is exceeded, monthly payments will increase. It is best to always check the available credit on a credit card, and stay below it.
Payment Method
If cash is used instead of credit cards when shopping, bad credit can be eliminated. With cash, there are no finance charges to be paid each month. Leaving the credit cards at home will cause less temptation to use them.
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