Bad credit is a problem that is plaguing a lot of people in the United States of America today. With the global economic crisis, a lot of people have ended up without jobs and as a result without money to pay for essentials. In such a situation, repaying credit card loans is not on the top of the to-do list of people in this country.
You can end up with a bad credit history for a number of reasons. We shall go through each one of them and then we shall discuss solutions to avoid the same.
A lot of people use credit cards as a necessity rather than a convenience. Using a credit card as a convenience is when you use it because it allows you to avoid carrying large amounts of cash. If you use a credit card for this purpose, then you are safe. You must pay all your dues within the due date at the end of the month to avoid paying interest on the money borrowed. The grace period will usually be around a month from the date of purchase. But if you end up borrowing money to make ends meet and do not manage to pay it back by the end of the month, you will end up paying interest on the loan. And credit card interest rates are very much higher than conventional loan interest rates. If you need money urgently, the best thing to do would be to use your card and then take up a traditional loan to pay off the dues on the card. This way you will pay a lot lesser in interest on the traditional loan than a credit card loan.
You can also get a bad credit record if you do not pay your dues on traditional loans, mortgages, and other financial instruments. The loan will always be linked to a social security number and that number will be linked to the credit record. The credit record is something that is maintained by the credit bureaus. There are three major credit bureaus from which you can access your credit record. If you want to check it up, you can do it only once every year. But all major financial institutions and government bodies can access your credit records to check you up.
In order to avoid bad credit, always make it a habit to save for a rainy day. Not saving on a regular basis can put you in to a lot of trouble in the future. And also avoid getting into credit card debt as explained before. Even getting a new cell phone connection can become a problem if you have bad credit. Getting a job can also be difficult in larger companies that conduct a thorough check on a person before employing him or her.