Thursday, June 29, 2017
 

What cards can I get with bad credit?

“What credit cards can I get if I have bad credit?” #AskExperian takes to the streets to find out your credit questions and answer with our Experts. Visit http://www.experian.co.uk for more information.

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Cost of Bad Credit

When it comes to your credit score, if you aren’t making the appropriate financial decisions to keep it as high as possible, you are playing with fire that could cost you hundreds of thousands of dollars.
In recent times lenders have had to become more selective about who they loan to. As a result, the difference someone will pay with bad credit versus good credit is substantial. Lower scores can drastically change your financial situation your whole life.
I’ve created a scenario to contrast the situation between two women who make the same financial purchases and moves over the course of their life. They are teachers at the same school; they live in the same area, and have similar income and family. The only difference between the two women is their credit score.
Sally has a FICO credit score of 740 and Sara has a 620.

Sally maintains her good credit by:
• never maxing out her credit cards
• applying for credit sparingly
• paying her bills on time
Creditors value this type of borrowing and reward Sally by offering her more credit, increasing her credit limits, which permits her to spread her balances across several cards. Sally knows how important her credit score is and takes the necessary steps to protect it.
Alternatively, Sara’s poor credit is a result of:
• missing one semester of work unpaid because of a medical issue
• sometimes maxing out her cards
• sometimes doesn’t make her payments on time
This type of financial behavior discourages lenders to extend more credit. Sara tends to spread her balance across fewer cards than Sally resulting in a lower ability to negotiate lower interest rates.
Sally and Sara borrow the same amount of money over their lifetimes but spend different amounts because of their credit scores.
Here is a scenario to help you understand how.

• Each obtains ,000 in private student loans
• In college they get their first credit cards (age 20) that carry a ,000 balance, on average, over the years
• They buy new cars (first car, age 20) and replace them every 5 years. They purchase their last vehicle at age 70.
• Each buys her first home with a mortgage of 0,000 at age 30
• They each move into a new larger home after turning 40 (0,000)
• Their second home also has a ,000 home improvement loan taken out for remodeling
**Please note that the following examples are purely hypothetical. Interest rates will rise and fall over time and payments on homes and cars will vary as a result of this. These illustrations are meant to help draw a picture of how much average to poor credit can cost someone. **

 

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