Various lists of good financial habits often teach us that debt is something you should escape first. Besides the stress and the very fact of having financial commitments, it has some other side effects. Thus, the late payment of debts inexorably reduces your credit score. What is the danger?
Having bad credit can become a problem in the future. If you're likely not to pay your bills in time, the late fees are not the only problem you will face. In addition to the higher interest rates or even some loan denials, poor credit scores can also lead to housing problems. As a person with poor credit presents potential risks, renters are likely to charge a higher price for people with a bad credit score. Also, such people usually pay more for insurance or car rental.
Also, having a bad credit history can negatively affect your future employment. It is a known fact that some employers may run a credit check before offering you a job, especially if you want to get a management position or something related to money.
So what is a bad credit score? The most common credit score in the United States is the Fair Isaac Corporation Score or FICO score. The minimum FICO score needed to get a loan or many credit card accounts is 670. To understand how it works, you should know its primary elements.
First is your payment history. It has the most significant weight (35%) and shows if you are paying your bills on time. Even a couple of days of payment delay can count.
The second is the total amount an individual loans (30%). It consists of all the financial information, including your credit card balances, loans, mortgages, or other debts you have.
The next one is the length of your credit history (15%). And finally, the mix of credit types (10%) and new credits (10%). Now you know what to pay attention to. Keep track of your credit history now to avoid problems in the future.