What Are The Reasons Why People Get A Bad Credit?
It is certain that no one wants to have a bad credit score in their credit history. However, there are circumstances that are beyond one's control that can cause this, most especially when people fail to comply with their financial obligations. A negative credit report could be due to late payments, unpaid collection accounts such as utility and medical bills, wage garnishments due to unpaid debt, tax liens, repossession of vehicles, and home foreclosure. Once you get a negative credit report, you may undergo a legal judgment from a successful lawsuit. Indeed, today's credit system has no ability to distinguish between bad credit that happened as a result of job loss or illness and that from poor financial management.
The following are the major reasons why people get a bad credit:
Job Loss or Business Closure
Significant financial loss can be caused by being laid-off from employment. Similarly, entrepreneurs also suffer significant financial troubles which result in the closure of their business. Once this occurs, their source of income will cease to account for their financial obiligations. Losing a job or any major income-generating avenue is a common reason why many people got bad credit scores.
Illness or Accident
Medical-related situations like illness or a car accident is also one of the issues why people get credit problems. As expected, sudden medical emergencies will cause one's finances to be significantly decreased due to absences at work. Sadly, this can turn into complicated lawsuits especially when turned over to a collection agency.
Death of Spouse Or A Family Member
The death of a spouse or any member of the family is obviously a devastating event. It can cause trauma, emotional stress, and to complicate matters, leave the troubles of bad credit to the bereaved relatives. The loss of a spouse or any family member decreases the overall income of the family and surely increases expenses due to the need to settle medical bills and funeral expenses. Moreover, it can also lead to even the most honorable debtor defaulting on his or her obligations.
Divorce is another common cause of bad credit. Similar to a "death" in the family, divorce can cause emotional toil and stress for both the parents and children. A spouse (usually, the father) could be hit with child support obligations. The child obligation usually exceeds the amount of money ever spent on raising his family, and this can dramatically impact his ability to pay credit card bills. Any legal fees for getting a divorce and custody battles will surely hit the most solid of finances.
Being an Irresponsible Borrower
Late payments are one of the main causes why some people get a bad credit score. Some people have bad credit due to simple financial irresponsibility like forgetting to pay bills on time. These are caused by frequently spending beyond one's means, or worse, even use their credit lines and loans to gamble, drink alcohol or even purchase drugs.
While there are matters that may be beyond our control that can significantly impact our credit rating, it is imperative for us to manage our finances carefully. It is often said that "one who fails to plan, plans to fail" – which is why we have to take extra measures and precautions to make sure that we stay away from getting bad credit.
Even if you have poor credit, or regardless of your credit score you should still look into a car loan. The fact is working with the finance department at Kolosso could help you distinguish your needs, your current financial situation, and what your best options are in terms of an automotive loan. So if you are interested in purchasing a new or used vehicle, taking an auto loan out is always a great option.