The decisions we make financially usually have an effect on us during our lifetime. This call for caution when you want to make decisions that will benefit you in a positive way. It is good to avoid making mistakes when it comes to our financial decisions since these would affect us in a negative way. It is bad financial decisions that usually lead to a bad credit record. However, at times unforeseen occurrences also may affect a credit score in a negative way too. Some of the causes for bad credit include:
Credit card debt
Credit card payment is top of the list as to why many have bad credit records. Credit cards perform just like loans. The only disadvantage is that they have high-interest rates that are charged on a monthly basis. Many have turned to ownership of these cards but after using the credit funds have problems in paying back for the cash in good time. Failure to keep up with the payment for the cards leads to a bad credit record.
Rising cost of living
The cost of living in many regions including the UK keeps rising. However, the same is not the case for the pay checks. This means that many are living on the same paycheck even after a 30% to 45% rise in the cost of living. This has led to a sharp increase in the use of credit cards for many to afford their luxuries. Paying for the credit cards is a must but since many are living beyond their financial capacity, it becomes hard to pay for the credit debts as required thus leading to bad credit debt.
Accumulated unpaid bills
Accumulated unpaid bills from the past are reasons why many have a bad credit record. It is not only the bad payment of loans that can get you into having a poor credit record. Failure to meet your monthly power bills among others is able to move you to the bad credit category. You need to pay your bills in good time. This means making a proper budget for your funds right before you get to start using them.
Exceeded credit limits
Every credit card usually comes with a credit limit. It is good to ensure that you are always within your credit limits when making use of the card. Exceeding your credit limits is one of the causes for a bad credit record. When you exceed the limits set, you get to pay more to the credit card company. This is because your interest amount becomes higher and you are also charged penalty fees.
When you keep exceeding your budget, you will accumulate debts. Debts need to be paid in good time. However, living beyond your capacity can easily render you incapable of meeting your payments in good time. Late payment is not a good term in the financial world. For starters, it accumulates penalty fees with it. In addition, it spoils your reputation when it comes to making timely payments. Making late payments is one of the causes for having a bad credit.
Unpaid loans from the past
If you think a loan you had defaulted in before is past, better think again. Ghosts from the past usually have a way of coming back and biting hard. Unpaid loans from the past are sure cayuses for a poor credit record. If you have any unpaid loans that you had defaulted in, take your time and pay them back. You can contact the financier to make arrangements on how the funds can be paid back in a timely manner. It may have been a small amount of cash or one of a big amount of cash. Either way, it has the ability to ruin your credit record for a very long time.