With the increased availability of credit cards and other lines of credit, getting into bad credit has become easier. Without proper management, debts often put people in huge financial burdens, such that it can lead to sinking into bad credit and unmanageable loans. Consequently, this credit can have far-reaching effects, including being homeless, jobless, and loss of property like cars and other material possessions.
Credit cards such as fingerhut credit card and other credit avenues can help you grow financially, but it is important to remember that with poor management, any debt can bring about bad credit. The best thing about these credit cards, though, is that they influence your credit score directly, thereby enabling you to build your credit. This, in turn, makes it easy for you to qualify for higher loans and credit limits. With a good credit score, you qualify for affordable loans with low-interest rates and flexible repayments.
Here are the top 5 reasons why it is necessary to get rid of bad credit:
Less financial risks
Being you in bad credit puts you at a disadvantage of experiencing financial risks, especially in the event of emergencies. People with bad credit are usually one step away from financial disasters. Emergencies such as medical crisis or job loss could lead to repossession of your car, home foreclosure or even eviction due to inability to pay rent. This is because people with bad credit often do not have an emergency financial plan to turn to as they have exhausted all their borrowing avenues. Getting rid of bad credit will give you an opportunity to re-organize your finances to future proof any emergencies in the future.
Get low interest rates
Financial institutions and lenders charge high interest rates on credit and loans borrowed by people with bad credit. These interests can cause a huge impact on your financial well-being since you will end up spending more money when repaying your loans and credit. However, by getting out of bad credit, it becomes possible for you to enjoy competitive interest rates from creditors. Consequently, this puts you on a path of financial freedom since your credit and loans will not be expensive to repay.
High credit limits
People with bad credit and debts have limited credit limits. This is because lenders consider them high-risk borrowers and hence limit the amount of credit available to them. However, by recovering from bad credit, creditors increase your borrowing limits as you are now in a stronger financial position. It is worth noting that bad credit affects your credit score negatively thereby limiting your credit utilization. Low credit scores may make it hard for you to escape your bad credit status. With high credit limits, you can be able to pay off your bills on time, improve your quality of life and enjoy better insurance premium rates.
Better job prospects
Prospective employers check your financial background including your credit before they decide on hiring you. For instance, jobs like financial planning, management, executive, and government jobs put great emphasis and concerns about your finances. Therefore, by having bad credit, your chances of placement in such jobs are greatly reduced. In line with this, getting rid of bad credit makes your application for jobs and promotions competitive and hence high chances of landing employment. There are debt collectors who call your workplace to pressure in paying back the debts. This is not only a source of embarrassment at the workplace but can also de-motivate you, thereby affecting your performance.
Better mental wellbeing and health
Managing bad debts and credit can cause stress, especially if you find yourself increasingly needing new debt to pay off old debts. This, in turn, can lead to depression and consequently affect your overall health. The situation worsens when there are debt collectors pressuring you daily to pay off your debts. By managing your credit and getting out of debt, you enjoy peace of mind, which culminates into mental health. At its worst extremes, bad credit can lead to suicidal thoughts especially for people with overwhelming debts.
After removing bad credit from your life, you should strive to achieve financial independence by reducing your borrowing and increasing your savings. You can also cut costs on expenses that you can forego. This helps you to build good credit and qualifying for higher credit limits. Avoid reliance on short-term loans, as they are expensive to finance. In the long run, you can apply for a mortgage to protect yourself from the effects of increasing rents. Generally, with good credit, you get a chance to reorganize your life for your own sake and for that of your children.