Do not underestimate the power of your credit report in influencing new & existing lenders in deciding whether to establish a relationship with you or to close your current accounts. A report file is a set of detailed records demonstrating your financial performance till date. The best option in healing your bad credit report is to understand the importance of several factors in harming your credit score. Then, perform immediate rectifications in management of credit.
Harm my credit score.
How does a bad credit report harm my credit score? If the reported information is inconsistent, having bad objects or looking un-glam, chances of harming your credit score increases drastically. Experian credit bureau once mentioned that up to 79% of local & expat borrowers faced at least 3 problems with their credit reports.
One major concern that harms your credit report is a creditor’s claim on negative info. It is because your existing lender is worried on the unpaid mortgage, second mortgage repayment and outstanding interests not paid. A financial distress is formed for your lender who in turns needed to pay either a coupon on bond or dividend on issued capital to their investors. The debt burden has since been shifted using negative reported claims to your credit report.
Another major problem that damages your credit report is local government’s claim on unpaid liens. Bad debtors usually missed payments for tax liens, real estate taxes or additional property taxes. Sometimes, it might be merely a late submission of payments for tax liens. As local governments have to finance the State’s county loans or provincial loans, not paying tax liens resulted to decrease in government revenue to support infrastructure debts & collateral obligations. The debt burden also shifted using claims on unpaid tax liens in your credit report.
An interesting yet major issue that hurts your credit report is submitting incorrect personal information. One common mistake of individuals filling up a credit report form is missing out an employment income, direct contact number, date of birth or residential address. When a credit bureau failed to reach out to you, the agency might decide to write-off certain debt info and struck off your credit report as dormant or delinquency status.
Therefore, the above concerns had to be addressed immediately once you spotted the reported bad objects & information in your credit report. For a good credit repair, good debtors ought to notice the positive correlation between a credit report and a credit score. It is advisable to hire a professional credit repair company or companies to manage your credit report errors too.
Higher interest rate expenses.
Once the damages had been done on your credit report, likely downgrading your credit score, there is almost an immediate effect of financial institutions re-adjusting the types of credit lines available and any forms of debts for you. The financial system is interconnected and linked across several pool of lenders, thereby receiving quick responses upon notifying other creditors on any bad credit reports.
A potential financial repercussion that harms your credit score is facing higher interest rate expenses. For instance, your current mortgage interests might be low but after adjusting to a lower tier – sometimes known as downgrade of credit rating to poor – you might end up servicing higher interest financing costs to the mortgage debt repayments.
Another debt repercussion that hurts your credit report is an increase in number of bank rejections. For example, you tried to apply for new credit cards, additional personal loans or finance a second mortgage debt, suddenly realizing that no lenders are willing to provide high-quality financing to you. Most creditors don’t want to incur unwanted credit risk.
Hence, it is an unsurprising fact that a damaged credit report does affect your rate of approvals & cost of borrowing. The problem lies in your bad credit report and score. No one is in the right mind to loan out slosh money when the debtor’s status is of poor financial standing.
Damaged local reputation.
Upon receiving an important debt info of a badly tattered credit report that harms my credit score, one will inherit the risk of getting a damaged local reputation. Banks and credit card companies do retain a list of “black” debtors where these borrowers were barred from any lending practices or promotions conducted during the promotional periods.
A damaged local reputation does harm your overall credit rating. It becomes difficult in navigating among several fresh & existing lenders while requesting for new lines of credit is an uphill task. Local lenders do share their knowledge of bad debtors in exchange of security in terms of risk of financing and rate of delinquencies. The banks had enough bankrupt debtors and existing litigation charges on hand already.
No, it is still possible to obtain a credit loan from debt relief agencies such as prominent credit unions or the savings & loans associations (provided you are a local residing in the United States, Canada or United Kingdom). Do remember that local reputation is an intangible asset that cannot be quantified in terms of dollars and cents. The amount of paid efforts in some reputable credit repair services is needed to boost your financial reputation.
Disapproval & rejection from financial institutions.
Relating to the point of having a damaged local reputation – sometimes known as an industry bad debtor – no banks or credit card companies wanted to do business with you. An (almost) immediate effect of getting disapproved on mortgage loans and rejections on credit cards could be of danger. Chances are you might not be able to obtain personal loans and cash advances too.
Facing difficulties in getting approvals due to a bad credit report is terrible. Your lenders often perform several credit inquiries over your existing bad credit score and shy away from issuing new debts to you. Not only do you undergo pains in getting fresh approvals, but also receiving new debtor’s agreements on higher interest rate expense or any other revised contracts to you mortgage applications and credit card loans.
Banks and credit card companies do have the authorities to change the contractual agreements based on prevailing financial conditions. A bad credit report and credit score almost take no efforts in seeking redress on your potential delinquency status. Thus, credit revisions had been made to significantly lower the risk of loan defaults.
Lack of emergency & contingency funds.
Compiling the damages done on your credit report, the need of liquidity depleted almost immediately. When a financial crisis or an economic turmoil comes, stirring employment turbulence on the economy, you are the first to be financially distressed. A troubled debtor cannot make proper financial decisions and might ultimately led to bankruptcy filings.
A lack of emergency funds is because most of your monthly employment income has to go to financing existing unpaid & paid mortgages, auto loans, gas bills and other utilities expenses. It is impossible to cough out some savings for an emergency fund. The vicious debt cycle continues till a “revolving credit” cycle.
A lack of contingency funds is because minimum savings had been channeled into personal savings plans via banks & insurance companies, not going into a risk-free interest-generating savings account. This is a major risk in rendering you disabled in the realm of investing and equity growth. The foundation of investments doesn’t grow over time leading to lack of liquidity in managing impromptu debt circumstances.
Therefore, it is imperative not to reach this tier of dire debt management problems. A good credit repair company is highly recommended for good & bad debtors in resolving existing not-so-big financial concerns. Professional credit repair services accelerate your speed of debt recovery and keep the debt collection agencies at bay. Then, it is possible to at least build a “war-chest” of contingency & emergency funds.
Good to know about implication: how does a credit report affect me?
Lastly, the implication of not knowing how a credit report affects you is disastrous. It is imprudent to leave your bad credit report unattended as local and foreign lenders won’t accede to borrowing requests in fear of delinquencies and bankruptcies. Banks often perform credit inquiries on debtor’s financial conditions while credit card companies doing inquiries in determining the rate of interests and types of new credit card loans to be distributed.
Quote of the Day: “Remain strong in finances – KIG Hall [2013-2018]”
» Defining debt problems: What is wrong with my credit?
» Management of credit: How do I restore my credit?
» Hire reputable credit repair companies: Who do you trust?
» What you need to know about a credit repair: Knowledge is freedom!
» Dos & don’ts of a credit repair: Dos and dons of a credit repair!
This article was originally published on March 12, 2014. It has since been updated.