Bad credit history and the impact on your life

ADVERTISING DISCLOSURE

ADVERTISING DISCLOSURE:
Credit-Land.com is an independent, advertising-supported web site. Credit-Land.com receives compensation from most credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. Credit-Land.com has not reviewed all available credit card offers in the marketplace.

Credit Card Applications » Research » Guides » Building Credit History » Bad credit history and the impact on your life

Bad credit history and the impact on your life


Updated: December 26, 2012

Remember how you used to be ready to lend your last dollar to your trusted friend back in college, even though you couldn`t see where he was going to get the money to repay you? Likewise, how do you react when approached by an office colleague for a small loan, who earns a decent salary, but who had to be reminded twice by you before he paid back the thousand dollars he had had borrowed from you during a particularly sticky month before? Right, you make up some story to avoid lending money to him again.

How is Credit History arrived at?

For ages, financing and banking have been done on the basis of a very precious commodity - trust. A person who has a good record in the past can find a number of people willing to lend money to him in difficult times, but a person who has not been the most prompt in repaying a loan might find people turning away from him when he needs some money again. This is what is known as a credit history, and the instances given above might be simple examples, but a bank or financial institution does the same in a much more detailed and systematic way to find out the creditworthiness of a prospective borrower.

What leads to bad credit history?

You can damage your credit history by doing any or all of the following things:

  • Late repayments on credit card balances or loan EMI schedules
  • Insufficient funds in your balance causing checks issued by you to be returned
  • Bank induced closure of your loan due to forged or insufficient documentation
  • One time settlement of dues with a credit card issuer or a lender of money
The impact of Bad Credit History

Every individual and company are assessed by credit rating agencies which give a credit score based on the past history of credit by that individual or company. If this rating shows a bad credit history, then subsequent applications of loans or credit cards are likely to be rejected. Even if they are sanctioned, there will be certain additional conditions attached.

In case you need a personal loan, even if the load is sanctioned, you are likely to be charged a slightly higher rate of interest than others with better credit histories. In home loans or car loans, a part of the price is to be paid by the borrower before the loan can be disbursed, and this margin amount is likely to be slightly higher for a person with a bad credit history. For credit cards, a bad credit history causes higher annual fees and lower credit limits.

It is therefore, very important that we apply for a loan or credit card only if necessary, and if we are sure of being able to repay on time, because if we are not careful, these can give us a bad credit history which will make life really difficult in the future.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
Add to Favorites:
Get the latest news, articles and expert advice delivered to your inbox. It's FREE.

Related Research:

Credit Card Tips For Holiday Shopping 2017

Credit Card Tips For Holiday Shopping 2017

Posted: November 27, 2017

November and December are the busiest months as gift shopping reaches its peak. People rush around looking for the best gifts and the best deals leaving a lot of money in the shops. Holiday season may force you to go over the household ... Continue reading
How to Earn on Black Friday Deals in 2017

How to Earn on Black Friday Deals in 2017

Posted: November 23, 2017

Black Friday is around the corner! Ready, steady, go! But before you go on a shopping spree to catch the jaw-dropping deals and discounts, make sure you maximize them. Did you know that you can not only save on Black Friday, but also earn? ... Continue reading
Autumn 2017: Best Rewards Credit Cards for Thanksgiving Shopping

Autumn 2017: Best Rewards Credit Cards for Thanksgiving Shopping

Posted: November 20, 2017

Thanksgiving is coming, and whether you are hosting a meal or coming as a guest, your spendings are going to accumulate faster than you can notice. A holiday feast is a costly matter – each year Americans spend around $50 on a Thanksgiving ... Continue reading