Having bad credit can make you suffer in ways you may have not considered. If you find you’re burdened with excessive debt and want to stop debt collectors, it might be time to call a Cleveland credit repair attorney at Luftman, Heck & Associates to help you stop bad credit.
How Bad Credit Can Hurt You
A low credit score doesn’t just mean you aren’t a suitable candidate for a credit card. Having bad credit has a negative impact on many aspects of your life, including:
Your Home- While mortgage interest rates are set by the Federal Reserve and other market institutions, the rate you receive is based in part on your credit rating and how much money you want to finance. Chances are, if your credit is poor because you have a lot of debt, you probably won’t have very much money to put as a down payment. Having inferior credit and a small down payment makes you a risky customer in the eyes of the bank, so they may charge you a higher interest rate to protect their investment. Some lending institutions may decide you’re simply not creditworthy and reject your loan request.
Renting an apartment can be just as difficult, since landlords will check your credit score when you submit a rental application. If your score is low enough they might assume you’ll be late with the rent, so they may select a tenant that appears more financially sound than you.
Your Car- Many car dealerships provide financing. However, dealerships use financial institutions to finance customers, so they still run a credit check and decide what they can lend based on the results. You might lose out on the car of your dreams because a dealership decides they can’t lend you enough to purchase it. Or you could end up with an astronomically high interest rate that tacks thousands of dollars onto the purchase price over the lifetime of the loan.
Your Job- It may seem strange that your credit can affect your job prospects, but it’s true. Many companies will check your credit when you apply for a job, and they can use it as a reason not to hire you. To an employer, a low credit score can signify irresponsibility or lack of stability.
Your Insurance- One study found that drivers with poor credit actually had higher insurance rates than those who had an accident on their record. Auto insurance companies use your score to predict the chances of you filing for a claim. According to their statistics, the lower your score, the higher the odds you’ll file a claim.
How to Avoid Bad Credit
There are many ways you can keep your credit score reasonably high. Whether you’re trying to maintain good credit or you want to erase a bad score, keep the following tips in mind:
- Build a savings account
- Pay bills on time
- Don’t apply for a lot of credit at once
- Pay credit card balances in full each month
- Don’t take on too much debt
Consider Debt Relief Options
Not everyone with bad credit is actually financially irresponsible. People get laid off from jobs, incur unexpected medical bills, or get hit with huge home or auto repair bills. When you’ve amassed a debt that’s too immense to pay off, you should consider other options to take care of your bills, such as bankruptcy.
Filing for bankruptcy may seem extreme, but it can be the perfect solution for some people. As soon as you file, the court grants an automatic stay, which stops creditors from being able to collect money from you while your case is in review. The automatic stay gives you a chance to catch your breath, so you can immediately begin building up your savings, paying off debts that won’t get discharged, or catching up on past-due payments for items you intend to keep.
If you’re facing foreclosure or you’re about to have your car repossessed, filing for bankruptcy can help. The automatic stay stops your home and auto lenders from being able to collect from you while your case is processed. You might be able to keep your home if you file for Chapter 13 bankruptcy. Chapter 13 will allow you to devise a repayment plan where you pay off your car loan or mortgage at an amount that is more affordable to you.
Chapter 7 might be a good option if you want to keep your car but you either don’t have a home or you decide not to keep it. In a Chapter 7 bankruptcy, you can use your automatic stay to make good on your auto loan arrears. During your case, you can reaffirm the debt of your car loan, which essentially takes it off your list of debts to be liquidated and leaves you responsible for the remaining payments. Do this only if you intend to stay current on payments to keep your car.
Speak to an Attorney About Your Options
If your credit is in need of repair, you may want to speak to an attorney who specializes in bankruptcy and debt relief. The attorneys at Luftman, Heck & Associates have extensive experience in this area and have helped countless Cleveland residents get their bad credit under control. Call us today at (216) 586-6600, or contact us online to schedule your free consultation.