How much does bad credit cost you? We discuss the importance of your credit report and what type of transactions affect yours.
Allow me to talk about consumer debt and maintaining good credit.
Here are some of the factors that show up on your credit report: your mortgage, credit cards, student loans, debt, medical bills and many more.
We tend to talk about credit reports like it’s a grown up thing, but actually, once you get a social security number and you do anything like going to a mall and opening up a $300 credit card at Pacific Sun Wear for example, that instantly goes on your credit report even as an 18 year old.
And notoriously, 18 to 25 year olds destroy their credit before they even really know what their credit score is or before they ever need their credit for something like an apartment or a car lease.
It’s important for you to know how much bad credit can cost you.
For example:
If you have bad credit and you put your name on a utility bill for your first apartment, the utility company might charge a whopping deposit. Now, they might charge you for that upfront or in installments as you pay every month.
There’s a push right now to get people who pay their rent on time to be able to use that Renter’s Credit as part of their credit score. So, whereas someone who is paying a mortgage is getting a boost to their credit score for paying their mortgage on time, there will be a boost to your credit score for paying your rent on time.
The other thing you can do to build your credit if you have bad credit is to apply for some pre-paid cards. These are cards that you put money in so you can then use them as a debit or credit card.
A prepaid credit card can build your credit and give you the opportunity to get a non-pre-paid card after a year or two.
One thing to keep in mind is that banks and the creditors like to see available balances high and the balance due very low… that’s how they determine your credit scores if you’re going to get credit from them… So if all your credit cards are maxed out you’re probably in trouble because they’re going to see that you don’t have any credit available to you and you might be opening another credit card because you’re desperate.
One other thing that might start to affect your credit report is your presence on social media. If a creditor thinks that your behavior is risky, they might be more inclined to turn you down for credit.
All those things are part of your credit picture now due to the internet and easy access to information. Your credit score is made up of a lot more things than it used to be when I was young…