About Bad Credit

There is a myth that people with bad credit are poor; unemployed or under-employed; struggle to meet the basic necessities of life, such as paying for food, shelter, and medical care. These mythical people can’t manage money, don’t understand the basic concepts of credit, or just don’t care about paying their financial obligations in a timely manner.

In all likelihood, many people with bad credit do fit that profile, but it’s equally likely that many do not. On paper, people who struggle with personal finances won’t all look the same. Some consumers with financial management issues have steady employment with high salaries, drive nice cars, live in beautiful homes, own boats, enjoy expensive vacations, but they, too, have bad credit. The truth is anyone can have bad credit. Even millionaires have money troubles; earning money and managing it wisely are two very different skills.

On one end of the spectrum are people with bad credit who don’t have enough money to make it from paycheck to paycheck. These consumers believe they have no alternative but to use credit to supplement their income. In doing so, they can get stuck in a vicious cycle of borrowing money, over extending themselves, continuously struggling just to payback their loans. There are many credit products with exorbitant fees and high interest rates that make repayment extremely difficult and expensive. Or, many consumers can become victims of scams or other too-good-to-be-true offers in desperate attempts to solve their money troubles, only to be taken advantage of by unscrupulous companies that target this vulnerable sector of the population.

On the other end of the spectrum are people who buy into the American consumer dream to have more, get more, buy, buy, and buy. And if they can’t afford it, they find a way to finance it, or they charge it on their credit card. In an ever increasing stack of bills and financial obligations, many people find themselves working to pay off their debt, rather than enjoying life, putting money aside for pleasurable activities, starting a college fund for their children, or saving for retirement.

Consumers in both of these scenarios find themselves in the same place: they have bad credit loans. In both situations, people develop the same problem, their finances spin out of control and they suffer, both financial and emotionally. There can be few greater stresses in life than monetary woes; not having enough money to meet life’s financial obligations can be extremely stressful. People can lose their homes, relationships suffer, and families can break apart all due to poor money management. Poor financial management over time leads to a bad credit history and a low credit score, making an individual a poor credit risk.

There is a positive in all of this: anyone can repair their credit. It does take time, energy, and self-discipline, but it can be done. In order to do that, it’s important to gain a better understanding of various aspects of personal finances. A savvy consumer can make better choices. However, the first step for an individual to take toward gaining control of personal finances is to know what’s in their own credit profile. That can be done by reviewing their credit report and obtaining their credit score.