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MAKING BAD CREDIT WORSE
Too often than not, people with poor
credit end up doing things to try and get
their finances back in order that ultimately
makes their credit worse.
Applying for a credit card with bad credit
A credit card is one of the best means
of
rebuilding credit. However, credit cards
also open new doors for damaging credit.
Suppose you apply for an unsecured card with a
$500 credit limit. Being that the limit is
only $500, you are confident that you will
always be able to repay the balance, even
when the credit limit is met. Unfortunately,
unforeseen issues often arise, and you miss
a payment. As a result, you are hit with a
late fee, which puts you over the limit.
Therefore, you are also hit with an
over-the-limit fee. These penalties end up
being a total of $100. So, instead of having
a $500 balance, you now have a $600 balance.
That's a 20% increase added to your balance!
If you miss another payment, you are going
to be hit with more fees! Your $500 limit
can easily end up costing you hundreds, if
not thousands more! Also, your
late
payments and over extension of your credit
is going to hurt your
credit rating, making
your bad credit worse.
People with bad credit are going to have a
hard time paying any extra fees or charges.
Even though unsecured cards with low limits
are great for rebuilding credit, they can
also damage your credit if you do not
use credit cards wisely.
Another example of when credit cards get
people with bad credit into trouble is when
they keep applying for credit cards so that
they can pay off other credit cards that are
maxed out, over extended or are delinquent. This is a revolving cycle,
resulting in consumers really putting
themselves in over their heads in
credit card debt. The
interest rates of the newer credit cards are
going to be sky high as a result of their
poor credit card usage.
The bottom line is, don't use a credit card if
you don't intend on using it properly.
Abusing even one credit card is going to
make you vulnerable to all sorts of
potential credit and money issues.
Applying for payday loans with bad credit
Not only are the interest rates
associated with payday loans ridiculously
high, payday loans have some pretty harsh
penalties associated with them for not
making payments on time. Suppose you obtain
a payday loan for $1,500 but fail to repay
the loan on time. You are definitely going
to be hit with late fees up to $100! So
instead of owing $1,500, you now owe $1,600!
You will be hit with the same type of fee
for every week that you neglect to pay your
loan balance. That's right, $100/week! Its
easy to imagine how fast that total can
increase and how long it will take to pay
off the loan. It is also very common for
people that are having problems paying off a
payday loan to apply for another payday loan
to pay off the first one. Seems like a
sensible solution. However, if you can't pay
the first loan, what makes you think you
will be able to pay the second one? Bottom
line, these are one of several
types of loans to be avoided.
In conclusion....
Juggling debt is not the answer for
recovering from bad credit. You will only
end up further damaging your
credit score.
You can learn
how to develop a financial plan for
eliminating your debt and developing strong
credit.
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