What is Credit?
Credit allows you to buy products or services now and pay for them later, over a set time. This enables you to enjoy your purchase immediately while giving you extra time to pay.
Lenders check your credit report and score to decide if you qualify for a loan. A good credit history shows you’ve paid your debts on time, which improves your chances of getting approved. A bad credit history, on the other hand, shows missed or late payments and may cause lenders to deny future loan or credit applications.
What is a Low Credit Score?
A credit score below 580 is typically considered “bad credit.” It often results from late or missed payments, overused credit lines, or unresolved debts.
The Impact of Bad Credit
With a low credit score, you may:
- Struggle to get loan or credit card approvals.
- Face higher interest rates when you do qualify.
- Be asked for higher deposits on rental agreements or utilities.
How to Bounce Back
Improving your score starts with financial discipline:
- Before signing any credit agreement, ensure you fully understand the terms.
- Pay all bills on time.
- If possible, pay more than the minimum to reduce your debt faster.
- Limit your amount of debt. A good rule is to keep the credit you use below 35% of your available limit.
- Reduce your credit card balances.
- Clear any adverse accounts and request paid-up letters.
- Regularly check your credit report to ensure all information is accurate, and to monitor for any fraud.
- Limit how often you apply for credit. Making too many applications in a short time can worry lenders and suggest you’re having money problems.
Ready to fix your credit situation? Get support from Mdalisu’s Credit Ready Plan.
