Bad Credit: How It Happens and What You Can Do About It

There are several numbers that will follow you throughout life. There’s your birth date, your social security number, the number of times you’ve rewatched The Office (just kidding!), and then there’s your credit score. This last one is relatively important because your credit score is a number that will determine your borrowing options, mortgage approval, and even whether you can be denied a loan in your lifetime.

What is a credit score, anyway?

Your credit score is a number between 300 and 850 that’s determined by a range of factors including your current amount of debt, the type and number of accounts you have open, how you utilize your credit, your payment habits, and your credit history—which begins from the moment you obtain your first credit card. 

For more info on how to understand your credit from an expert, check out this great blog post breaking down credit here.

What’s the big deal?

Having bad credit can affect your future financial wellness in a big way. Resources like Student Loan Hero give a great breakdown of all the things that impact your life when you have bad credit. Ultimately, if your credit score reflects a lot of missed payments, your future landlords, loan lenders, insurance and utility companies will see it. 

(Sidenote: Did you know you have an insurance score? While they’re not the same number, your credit score can have an impact on your insurance score too. If you’d like to find out more, the Insurance Information Institute can help you educate yourself on this topic.) 

Bad credit doesn’t just impact your ability in the future to borrow money either. There are a lot of careers and work opportunities today where you may be in a position to handle finances or determine your department’s spending and budget. When considering you for such positions, an employer may want to check your credit score first – you want that number to look good! 

My credit score is lower than I want it to be, what now?

Maybe you’ve been declined for a loan or maybe you visited Credit Karma to check your credit score and didn’t like what you saw. Either way, all is not lost! There ARE solutions.

Bringing in a professional to repair your credit score is an option, but there are some actions you can take yourself to better your credit score as well as educate yourself on maintaining your financial wellness. Managing your money and meeting your monthly budgeting goals can sometimes be as easy as making a plan and sticking to it. Not only is this the best way to not spiral into a financial panic, but creating a plan can keep you on pace to have a solid credit score and more financial options in your future. 

Get your budget together

Did you know only 41% of people have a budget and regularly track expenses for food, housing, and entertainment? This can be a daunting task, but grab a trusted mentor or parent to sit down and help you with this or use the tools around you to help get you started.

The technology right at your fingertips can do wonders for your relationship with money and shine some light on the potential causes of your bad credit. Many college students and young adults have their phones and computers at their disposal. Use these tools to set up auto-payments or reminders, and go over your subscriptions and recent purchases on a weekly or monthly cadence. Maybe even revamp your budgeting knowledge with one of our budgeting videos at Ascent to turn you and your finances into the best version and reflection of you! 

Consider Credit Counseling

Maybe you feel a little in over your head or you’ve made some financial choices you wish you hadn’t—Credit Counseling could be an option for you. Consider it a path to gaining a little financial confidence when you need it most as these awesome women describe here.

Credit counseling is a nonprofit debt management option that is often used to navigate a stressful financial situation. Credit counseling can help you understand the setbacks with your credit and walk you through the quickest and most efficient options for repair.

In other words, meeting with a credit counseling agency can give you a little room to breathe again. Debt collectors? There can be an end to the incessant phone calls. You might be able to find help to reach an interest rate or payment plan to make life a little easier. 

Your credit affects so much and sometimes it can feel like everything is out of your hands. The anxiety of a collection agency spamming your phone, the future worries of becoming a homeowner, saving for retirement, getting approved for the best insurance or a car loan when the unexpected happens, can all come down to your credit score and the relationship you have with money. Rest assured, there will always be tools and resources to help you navigate along the way. 

For more guidance from Ascent on financial success, try out our landing page for all things budgeting.