Credit Score and Debt

You should know that a poor credit rating can mean refused loans and restricted borrowing, but you can easily repair your bad credit-scoring by applying some basic rules. Before you can start to repair your credit history though, you need to address the root causes of your debt problems.

Debt will likely come from one of the following areas; borrowing on credit cards, spending into overdraft, taking personal loans secured and unsecured, paying mortgage, or even replacing assets where you failed to have any insurance to cover the loss or damage.

If you have suffered from the latter, such as paying mortgage, or replacing assets which you failed to insure against, then this article is not for you, and you should click through for other information. If however, you are a guilty of living in your overdraft, and not paying credit card bills on time, and/or defaulting on monthly payments for services such as your credit cards, telephone, and utility bills, then this article is for you, because a single late payment of a bill will likely stay on your record for 6 months, and will definitely affect your credit score, likely, bringing it down.

Late payments are very dangerous for multiple reasons, especially with credit card payments, and direct debits arranged on your bank account. This is because late payments will incur you charges of �20-�30 from credit card companies for late payments, and you will allow interest to accumulate, making the burden of the payment due, to grow. Constantly paying late will cause the debt to balloon, and as consumers have commonly experienced, this pushes you over you credit limit, which in itself, will incur you over-limit fees of £20 to £30. Banks on the other hand use similar fines and charges, whereby they will charge you for non-payment of arranged direct debit in the region of £30-£40 for each unpaid item, as well as charge you over-limit fees should you spend over the arranged borrowing limit on your overdraft facility at the bank.

So you should be aware of the reasons behind bad credit-score, and hopefully by being wise and disciplined with your borrowing, and spending, if you can pay on time, at least the minimum payment, each time, then even though you will work off your debts slowly, you will surely improve your credit rating along the way.

Also bear in mind that you should budget your expenses based on your inflows each week/month. Paying a bulk off a loan or credit card can actually work against you if you fail to allocate enough funds for your other bills. So a good intention to pay a lump off one borrowing arrangement could lead you to default on a minimum payment elsewhere, thus jeopardising your credit score, and also increasing your debt through interest and charges, and maybe even leading you to use the money available to spend on your cards from your lump sum payment! So do not fall into the trap, slow and steady, and hopefully you will control your debts and improve your credit-score in the process.