Bad credit is a situation that tells the story of a person that fails to pay bills on time, and lenders also assume that they will not be able to make it soon. Then, a low credit score is a reference that is associated with this situation.
Having a bad credit rating turns into an arduous task to borrow money, especially with competitive interest rates. Typically someone falls into this category when the score is under 580 at FICO (the most common rating) or under 499 at Vantage.
One of the Credit Bureau that keeps track of credit history in The US, Equifax, said that when someone has a score between 300 and 579 on FICO (or 300 to 499 at Vantage) is categorized as “Very Poor”. In fact, they said that “roughly 62% of consumers with credit scores under 579 are likely to become seriously delinquent in the future”. There are no surprises here when lenders avoid doing business with people in this category, also known as risky borrowers.
Remember that credit, even that seems like something almost natural, has its foundation in trust. If someone is not trustable, doing business is not an option.
- There are fast tracks to put someone in a Bad Credit situation.
- No making scheduled payments in the last 90 days or longer.
- Going bankruptcy
- Having unpaid debts into collection.
Beyond not having access to reasonable interest rates, bad credit causes higher annual fees, fewer credit card choices, denial of loans for vehicles or houses, difficulty to get a fair rent, among other setbacks.
To summarize, a bad credit score makes someone’s life harder. The truth is that falling into this could happen at any given time to any of us. The good news is there are ways to repair this. Starting paying on time your debts is one of the first things to do.
There are other actions to take. In our following articles, we will be talking more about it.