Bad credit can have a sleeper effect in some ways. One day everything seems fine, and then the next day, you find out that your credit score has plummeted into the ground. Most people don’t know what happened to their credit because they have no idea what can cause credit to turn sour. Many people assume that if they pay their bills on time, they’re fine. If keeping your credit clean were as simple as keeping the wolf at bay, many people wouldn’t find themselves in trouble.
There are some typical things that cause bad credit. The most obvious cause is inquiries from companies assessing your credit status. An inquiry can come from a credit card company, a utility company, or a mortgage company. The problem is that it takes 30 to 60 days for credit to show up on your report. What this means is that if you were to apply for five credit cards, and were accepted and issued those cards, the approval would not show up on your credit report for 1 to 2 months. Therefore, if in the meantime you wanted to take out a mortgage for a house, the mortgage company would pull your credit, and they would be unable to tell if you were approved for the cards or not. The result could be a skeptical mortgage company who is weary of giving you any more money when they don’t know if everyone else in town has already turned you down.
Another thing that is typical and obvious to most people is that you have to pay your bills on time. There is no excuse when it comes to a creditor about why you couldn’t pay your bills on schedule. It is also important to know that whenever anyone considers giving you money, they will look at the last 12 months of your life. The last year of your life is crucial when it comes to credit.
Charge offs are another reason for receiving bad credit. A charge off is when you didn’t pay a bill, forgot to pay a bill, and it has become obvious to a company that you are never going to pay the bill. The company will write off your incompetence as a loss on their books for their taxes. When a company decides to take this route, it puts a negative mark onto your credit report. This mark that is made will stay on your credit report for 7 years, but if the company decides to update the charge for any reason, the 7 years will start over. Charge offs can be a pestering factor when it comes to ruined credit.
There are other things that make a difference on a person’s credit. However, most of these things are obvious. For example, if you come home one day to find that your car has been taken from you, it’s safe to say that your credit will be affected. If you come home to find that your home is now a part of the government’s property, chances are that your credit is suffering. If you owe someone money and you have decided that you are willing to let them take you to court in order to force it out of you, credit is the least of your worries (know that it will be bad).
Knowledge is power and armed with the proper information can help you in making the right choices when dealing with your credit. Being informed will help you to avoid obvious pitfalls. Ignorance is no excuse and it certainly isn’t bliss. Stay updated on your finances and all the pertinent information.
