Charge-offs, late payments, bankruptcy, and defaulting on loans cause you to have bad credit. It is no secret that the longer you continue having bad credit, the more money it costs you.
Each time you take out a loan or swipe your credit card, there is a system in place that tracks and keeps a score. Your credit score, whether bad or good, comes into play whenever you want a loan, and it affects your insurance premiums.
How Bad Credit Costs You
Here’s a look into how much bad credit costs you.
Mortgages
A bad credit score is detrimental because it prevents you from qualifying for the best mortgage rates. This means you pay more over the term of your mortgage. What may seem like a slight difference in interest rate adds up to thousands of dollars over the repayment period.
Credit Cards
A credit score below 580 only allows you to secure credit cards that require a minimum deposit of $100 to $200 to open a credit account. In addition, applying for the card is likely to cause your credit score to go down more because applying for a new card creates a hard inquiry on your credit report.
Auto Insurance
Your bad credit score negatively affects your auto insurance premiums because you are viewed as a high-risk borrower and more likely to file claims. A person with a credit score of 800 or higher pays approximately $1,297 a year, but someone with a credit score of 579 or lower pays $2,717 a year. Clearly, having a bad credit score could potentially cost you $1,420 a year when paying your auto insurance.
Affects Career Opportunities
Career advancement is everyone’s dream as it comes with better pay. But before employers entrust you with more responsibilities, they may pull your credit reports to ensure you are someone who is responsible, especially if the new position comes with financial responsibilities.
How Fast Does Credit Repair Work?
Credit repair is a process that takes time and effort, but results are usually noticeable within three to six months. The length of time varies from one individual to another, depending on how much damage has already been done to their credit reports and what has already been done to correct it.
Here’s how you can repair your credit:
- Paying down debt as quickly as possible – If you can pay off all of your debts in one year or less, this is the fastest way to get your credit score back where it needs to be. Of course, if this isn’t possible for you financially, then it will have to take longer than that.
- Getting rid of collections – If there are any unpaid bills on your credit report, they show up as collections accounts when they’re reported by the original creditor (and not updated by the collection agency). These make it harder for you to improve your score because lenders don’t like seeing collections accounts.
- Credit restoration – This is when you apply for new accounts and pay off all your debts on time. You can do this by paying off your bills or by using a debt consolidation company.
- Credit repair – This is the process of rebuilding your credit history. Credit repair involves the same basic steps as credit restoration but focuses more on improving your credit score rather than paying off debts.
Credit Restoration vs. Credit Repair
There is a lot of confusion surrounding the terms “credit restoration” and “credit repair.” Both involve correcting errors on your credit report and taking steps to improve your credit score. But there are some key differences between credit restoration and credit repair.
Credit restoration entails removing negative items from your credit report. You do this by negotiating with your creditor or disputing the information through the Fair Credit Reporting Act (FCRA) by proving identity theft or demonstrating that the item is inaccurate.
On the other hand, credit repair is the process of taking action to improve your credit score by paying off debts and maintaining a good payment history.
What’s the Difference Between a 600 and 620 Credit Score?
A credit score is a snapshot of your creditworthiness, and credit lenders use the credit score to make very important financial decisions about you. But is there a difference between a 600 and 620 credit score?
Here’s how VantageScore views your credit score:
- 781-850 = Excellent
- 661-780 = Good
- 601-660 = Fair
- 500-600 = Poor
- 300-499 = Very poor
This is how FICO views your credit score:
- 800 and above = Excellent
- 740-799 = Very good
- 670-739 = Good
- 580-669 = Fair
- 580 and below = Poor
Does Credit Repair Hurt Your Credit?
No. Credit repair actually helps you improve your credit score by removing negative information from your report and replacing it with positive information. Your FICO score, for example, will improve by a few points as a result of a clean slate on your report.
Final Thoughts
Bad credit costs you your financial freedom from getting auto loans, mortgages, and getting promotions. If you have a poor credit score, you can still improve it in a few months.
A more positive outlook toward a more financially secure future starts today. Give the Ascent Network a call today at 1-877-871-2400. Ascent Network helps consumers all over the United States and is available locally in California in Huntington Beach, Coachella Valley, Palm Springs, Cathedral City, Rancho Mirage, Palm Desert, Desert Hot Springs, Indian Wells, La Quinta, Indio, and Thousand Palms.
