You will see a lot of adverts on television nowadays about small loans that help you get on a bit in life, with easy repayment plans that let you pay as little or as much as you like, but how much do we actually know about them? In truth, not a lot… As of late, we as a society have been preoccupied with paying for things on ‘credit’, buying them and actually paying for them later. This can be a good thing and a bad thing depending on how you go about it.
Some people prefer to save for things in advance and then buy them, whereas nowadays it has become so easy to ‘buy now and pay later’ that it can get a lot of young people in trouble if they are not careful. Two major changes that have been made in the past few decades have been credit scores and credit cards, making it easier than ever for every average Joe to walk into a bank and come away with a loan. However if you don’t want to keep falling deeper and deeper down the rabbit hole of debt, you need to be safe with your loans and safe with your money.
Your Credit Score
While there is no universal way of ‘scoring yourself’ in general your credit score is either good, bad or non existent. In some cases no credit score works less in your favour than having a bad credit score as loan companies are unable to predict your future behaviours. While having bad credit is also undesirable, it can be fixed if you know what to do and what to look for in your current credit score.
In short, your credit score is what helps or hinders your progress in applying for loans, applying for credit cards and taking out mortgages. The better your credit score is, the more you are ‘worth’ to the lenders as you are good at paying back your debts, therefore money loaned is more likely to make its way back to its original owner. Having good credit is essential if you are in the habit of making big purchases and repaying them in installments.
Credit is the Opposite of Savings; The Danger of Credit Cards
We live in a ‘not tomorrow; now’ society and in many ways that is a good thing. By encouraging people to go out and live their dreams, live for today, we motivate them to do the best they can instead of putting it off for another time. However in some situations – like with credit cards – this can be a slippery slope.
Credit cards work as an opposite to our bank accounts and savings accounts. Whereas savings accounts are money put in today for our future, credit is pulling our future earnings to pay for things today, and this can be a real problem. The future is uncertain, which is why saving for it can make a real advantage, however spending money you haven’t potentially earned yet opens up a whole new can of worms. Say you are suddenly in an accident, and have to pay off the insurance claim? What if you are suddenly laid off and are unable to pay back your credit in time? Such occurrences have and will continue to happen and there is nothing we can do to stop them. Therefore we must be practical about our abilities to beg and borrow money that we have not yet earned.
Credit cards have a way of absolving a person from their responsibilities. Where in a normal situation one would have to save up the money, consider as to whether or not the purchase is necessary or extravagant and then pay over the money themselves, credit cards skip all that and just let us spend with no thought to the consequences or the repayments to be made. Yes, some of us will remain vigilant, but it can be very easy to forget to pay a bill when it is issued a month later.
Can I get a Credit Card with a Poor Credit Score?
Although it will be harder for you to get loans and credit cards with a poor or a bad credit score, it is in fact possible, albeit not recommended. By looking online or by requesting the assistance of a financial adviser, you will be able to see which options are available for you. One of the best ways of increasing your chances of getting a credit card is to increase your credit score, and that is done by making repayments on your current loans and checking through your current credit score to see if anything can be done to improve on it.
Having bad credit can have a major affect on your life as while loans can have hefty repayment price packages, they provide the general public with a way of paying off large transactions in a single sum, such as a new holiday or new car. If you are unable to apply for such loans, life could get more difficult for you. By making repayments on the debts you currently owe, you improve your credit rating and are then considered ‘more trustworthy’ by the lending companies, who will be more willing to accept further applications.
While in today’s society credit cards and easy loans make it very easy for us to make sudden purchases and big steps towards realising our dreams, it is important that we have the foresight to be able to back up these purchases with actual money, otherwise it is all for naught. You may fall further into debt, unable to pay off your current loans and putting yourself in a worse financial position than you were before. Take into account your credit score and try to be sensible when using your credit card for day-to-day purchases.