Bad Credit Warning Signs — that you must know!
A bad credit score can negatively affect many different aspects of your life. It can make it more difficult to get a loan, buy a car, rent a home and even to get a job. It can cause lenders to avoid lending to you or to charge you higher interest rates on loans. If you have bad credit, rebuilding your credit score can be time consuming and confusing.
For these reasons, it’s important to keep an eye on your credit score and to make sure that it stays healthy. In order to do that, you’ll need to know what can cause a negative impact on your credit score and take steps to avoid those situations.
Here are a few signs that you may have bad credit and what you can do if you’re in one of these situations.
You Haven’t Seen Your Credit Report
It’s important to review your credit report regularly. Everyone should review their credit report at least once a year. Not only is it important to know what’s on your credit report, but you should also check your report for errors or inaccuracies.
There are two national credit bureaus in Canada: Equifax Canada and TransUnion Canada. You should check your credit report with both of them.
You’re Not Paying Attention to your Credit Limit
If you don’t know how much credit you have, you can’t possibly use it responsibly. You might even end up going over your credit limit without knowing it.
Find out how much credit you have available to you and take steps to better control how much you spend. Your “credit utilization rate” is the amount of credit that you have compared to the amount that you are using. Most lenders want your credit utilization rate to be under 30%. This means that if you have $10000 in credit available, for example, that your outstanding balance should be $3000 or less.
You Don’t Have Enough Credit
If you don’t have much of a credit history, lenders may be hesitant to trust you. This probably affects younger people more often, but it can be a problem for just about anyone who doesn’t use credit frequently. Not having enough credit can make it difficult for you to get credit which makes it difficult for you to build your credit score and so on and so on.
What can you do in this situation? Get a secured credit card. These cards require a cash deposit as collateral, but all activities that take place on a secured credit card are reported to the major credit bureaus, which helps you build your credit. Once you’ve shown that you can regularly and responsibly use credit, you’ll be able to get a new credit card and other types of credit in the future.
You Have Too Much Credit
Having a large number of credit cards can be a problem. Not only can it cause you to lose track of exactly how much you owe on each card, but it can also lead to high debt and missed payments. All of these things are bad for your credit rating.
To solve this problem, assess your situation, consider closing some unused cards and come up with a strategy for paying down the debts on the remaining cards.
You Only Use Credit Cards
It’s important to have a good mix of credit, not just credit cards. You obviously shouldn’t take out a loan if you don’t need it or can’t pay it back, but if you do need a loan and you can pay it back on time, it will benefit your credit score.
You’ve Missed Payments
Payment history is a big factor in calculating your credit score. Even missing one payment can cause damage.
You can avoid missed payments by setting up automatic payments or by creating reminders in your calendar or phone to make payments before they are overdue. If you’re having difficulty making your payments, set up a budget that allows you to meet all of your financial obligations and stick to it. You may have to cut your other spending in order to make payments on time.