When people hear "bad credit", they get scared. It has an overwhelmingly bad connotation and there's a lot of fear mongering around it - "you'll never be able to get a loan!", "you can't build it back up!", "you're a bad person!". But as you will be able to see, a lot of the opinions and things that people think are facts, are simply misconceptions, and we're going to debunk them. Here are just 5 of the most common misconceptions about bad credit and why they are just myths.
1. You Can't Borrow Money
The most common misconception is probably that you can't get loans with bad credit. That is entirely false. While yes, most places will definitely require a credit check, that doesn't mean your possibilities are null. There are options you can pursue even with a poor credit score, as there are lenders who cater specifically to individuals with bad credit.
- Bad credit loans
First of all, you've got bad credit loans, which are loans that are offered to people with bad credit. The catch is that there will be limitations, such as a lower amount that you are allowed to borrow, a shorter repayment term, and a higher interest rate. You can check your score at Equifax to see where you stand and what kind of loan you can get.
- Loans with no credit check
Similarly to the bad credit loans, loans with no credit check come with a high interest rate and a smaller amount of money, as well as a shorter repayment period. However, like the name suggests, there is no credit check required for the loan.
2. Your Credit Can't Recover
A lot of people are under the impression that once you've fallen prey to bad credit, you can never recover from it. It's the end of the world! That is completely false. Bad credit is not a life sentence. It is, indeed, possible to improve your credit, build it up, and come to have an excellent credit score that will enable you to borrow money, rent apartments, get a credit card, etc. and will open up financial transactions that were previously denied to you.
3. Credit Is Difficult To Build Up
Or maybe you don't think that it's impossible to recover, but you believe that it is incredibly difficult to improve your credit and that the measures are not accessible to everyone. That's a misconception, as well. Here are a few foolproof methods to build up your credit:
- Pay off previous debt - one of the most damaging factors for your credit is previous unpaid debt. If you pay off all your debt, your credit will skyrocket. Use a service like Step Change to manage your debt.
- Pay your bills on time - do you know how important it is to pay everything by the date it's due? Set up direct debits to make sure you never miss a payment.
- Repay a loan diligently - a very effective way to build up credit is to get a loan specifically for that purpose. You see, if you repay a loan on time, with no issues, that demonstrates financial responsibility and will improve your credit.
4. Bad Credit Will Impact You Even After You've Improved It
It's a misconception that once you've had bad credit, you are marred for life. Your poor score doesn't have to affect you for the rest of your life. Just work on improving it and always be aware of how you are affecting and impacting your credit. Once you've gotten on track with good credit, all you have to do is maintain it, so there is nothing to worry about; your bad credit will not haunt you forever, so you can apply for loans with no issues.
5. You Should Apply For As Many Loans As Possible
When you've got bad credit and you're getting rejected for loans, surely what you should do is apply to every loan you can find, in order to maximise the chances of getting approved, right? Wrong! That is the worst thing you can do, because every single rejection will count against your credit score. Instead, you should look into the type of loans the company offers and whether they work with individuals with bad credit. It's a good idea to also do some "soft searches" that allow you to see whether or not you'd get approved without having to apply.
In conclusion, although there are a lot of misconceptions surrounding bad credit, and a lot of fear mongering happening, a poor credit score is not forever, and it's not as limiting as it seems. It just requires you to use some specific options catered to you and work a little on improving your score.