When it comes to your credit score, you are living in a vicious circle. You need to acquire debt to get a good score in the first place, but it’s the way you handle it that will affect your rating. In this article, we will list some of the reasons why a bad credit score can cause you problems, and then give you some helpful advice in rectifying the problem.


How a bad credit score affects you


If you have a bad credit score, lenders will consider you a risk. For this reason, your life will be affected in some of the following ways.


  1. You will find it difficult getting approved for a mortgage or any other kind of loan.
  2. If you are approved for a loan, you may find yourself with a higher interest rate because of your poor credit score.
  3. You may fall subject to a pre-lease credit check if you plan on renting an apartment. If your credit score is low, the landlord may reject your application.
  4. You will have trouble taking out a mobile phone contract, forcing you to take out a prepaid plan.
  5. Your insurance premiums may rise.


If any of the above has happened to you, then you probably do have a bad credit score. You can check your score yourself, but if you have ever defaulted on a loan or run up more debt than you can handle, you will already know your credit score will be poor. This doesn’t mean your options are entirely limited, as there are poor credit loans for home owners to get you out of a jam, though your priority needs to be on improving your score as soon as possible.


How to improve a bad credit score



  1. Stop getting into further debt. If your income is low, there are ways you can make money to help you pay off your debts sooner.
  2. Pay more than the minimal balance on your credit cards and loans each month, and then consider consolidating them. This will help you keep balances down, and give you the means to pay off your debt quicker.
  3. Don’t worry about old debt on your report. Instead of fighting to get it removed, financial experts advise you to leave it on until it expires naturally (usually within 7 years). Your old debt is classified as good debt (if you paid it off in time) and so it will actually boost your score rating.
  4. Always ensure you make bill and loan payments on time. By going over the deadline, you will suffer an incremental drop in your credit score. If you have trouble remembering payment dates, always mark them on your calendar and pay several days in advance to allow time for your bank to process them.
  5. Close down unused credit cards, phone contracts, store cards, etc. The more credit you have had access to, the more risk the lender will take into account. While you may have paid them all off - well done - you should still contact these companies to shut your file down for good, thus eliminating you from any accounts that could be checked by the lender.
  6. Apply for a credit builder prepaid card. You will have to pay a small monthly fee, but if you manage to pay the card off successfully over 12 months, an entry will be made into your credit file to show you have managed to pay off a debt. Your credit score will receive a useful boost as a result.



Closing comment


It’s not the end of the world if your credit score is low, but as we said, some of your options will be limited. By following our advice, you should be able to improve your credit score, though it will take time - these things don’t happen overnight. You should also seek further advice if you are struggling to manage your money, so book an appointment with a financial advisor or debt charity for professional advice in handling your money.