7 Signs You  Might Have Bad Credit


7 Signs You  Might Have Bad Credit

Everyone needs financing at some point in their lives, and If you have a good credit score, there’s no problem. You can quickly access premium credit cards, favorable interest rates, and better loan products. 

However, you’ll miss out on these deals if your credit is terrible. It also requires higher debt interest and even delays your retirement, costing you more over time. The problem is that many people are unaware of their bad credit. 

If you’re unsure about your credit standing, here are some warning signs of a bad credit score.

Credit Denial

Good credit ratings always give you affordable financing, and the average ones often net you credit with higher interest rates. However, your loan application usually gets denied if you have a bad credit score. 

Most lenders reject loan applications if borrowers have a bad credit history. It doesn’t only make you uncreditworthy but also tells you that your credit score could be in rough shape since 35% of your rating is based on your payment history. 

On a positive note, you’ll be able to understand where your credit stands and which part needs to be improved shortly after a loan denial. The Fair Credit Reporting Act (FCRA) mandates financial companies to provide a copy of the credit report they’ve used and explain why they denied or offered you adverse terms on loan.

Denied Lower APR Request

Most credit cards have variable interest rates. In other words, they can fluctuate based on several factors, including your issuer’s discretion. You can request to lower your card’s annual percentage rate (APR), especially the ones you’ve had the longest. 

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If your card issuer turned down your request for an APR reduction, they could have seen something on your credit report that gives them financial discomfort. Maintaining a good credit score is crucial to getting a lower APR on an existing account. So if you’ve been rejected for lower interest, your credit rating could be currently poor. 

Canceled Credit Cards

Credit card issuers conduct account reviews on their own occasionally. If they notice that a credit card user has too many late payments, consistently exceeds their credit limits, or has a zero balance, they tend to close their accounts, sometimes without notice. Doing so is the issuers’ way of keeping them from making any more purchases and preventing defaults.

These changes in your credit card’s terms and conditions could also mean that your credit rating may have gone down. Your credit utilization ratio accounts for 30% of your credit score. For example, if you max out your credit card, your credit rating will go down, increasing the interest rates of your other cards or loans.

Default Notice and Subpoena

If you break the terms of the credit agreement, such as missing payments or not paying in full, your creditor will send you a notice of default. When it reflects in your credit file, it damages your credit score. Even worse, it stays on your credit file for six years, even after paying the debt in full. In other words, getting credit cards, loans, or bank accounts will be harder for the next five years. 

An information subpoena can also mean you have a bad credit standing. It’s a legal document requiring a person to answer questions about their income, expenses, and assets. You’re probably being sued for severely delinquent debts (or charge-offs on credit reports) if you receive it. 

Apart from a judgment against you, you’ll also get a negative item on your credit report. Negative items like charge-offs hurt your credit standing and stay on your credit report for seven years.

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Debt Collector Calls 

Several items, such as gym subscriptions, medical bills, and utility balances, can wind up in collections. Hence, check your credit if bills start arriving or debt collectors start calling you. When a debt collector contacts you, it could mean your creditor has given up trying to make you pay your bills.

That also means these collection accounts have already been reported to one or all three major credit reporting agencies. However, immediately dispute them from your credit report if they don’t belong to you. 

Once collection accounts appear on your credit file, they’ll hurt your credit score. As a result, you’re less likely to get approved for credit cards and loans. 

Subprime Credit Offers

Another sign that your credit standing has fallen below a certain threshold is when you get pre-approved offers from subprime lenders. They typically offer bad credit loans, payday lenders, secured credit card issuers, or car title loan companies. 

Subprime lenders typically offer to finance those with a greater risk, particularly those who have a shorter credit history, late or missed payments, high credit card balances, or delinquent accounts. That’s why, if you suddenly get a subprime offer, especially if you’re used to qualifying for prime credits, your credit rating has become subprime or less-than-stellar.

Security Deposits for Utility Contracts

Utility contracts are considered a form of credit. The utility companies open and set accounts for you, technically issuing you credit. These are called open accounts, where you have a balance that you must pay in full each month. However, they don’t involve any interest, unlike traditional loans.

Despite that, there are credit risks to the service providers that users may be unable to pay off their account balance in full every month. To account for those risks, utility companies pull your credit and determine whether to do business with you. They’ll often use your scores to determine how much to charge if they give it a go.

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Utility companies can also ask you to put a deposit down on a utility account, especially if you have a low credit score. Fortunately, not all of them require a deposit, especially if you’re a low-income earner. Hence, look up your area’s laws and regulations related to this. 

Final Thoughts 

Having bad credit can be due to a variety of reasons. Do an in-depth check on your credit file to identify your bad credit behaviors or errors and immediately fix them. There are free credit reports from different sources each year, so try to take advantage of them. Knowing where you stand and watching your progress are essential to improving your credit.