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Bad Credit Red Flags

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Bad credit is like a slowly creeping disease. You won’t immediately notice it until it begins to show major symptoms that slowly consume you. You will start to recognize that you are headed for bad credit once you see these signs.

You have too little credit. There are a few people who are too afraid of applying for new credit or refrain from using their credit cards altogether. This is because they believe that credit problems can be avoided by using only cash. On the contrary, totally avoiding credit will not help in establishing a good credit score, since there’s no credit to begin with. By choosing not to use your credit cards, you will not be able to prove good payment history and experience in this line of credit, thus you will be deemed as a risky borrower by lenders and creditors that you want to make transactions with in the future.

You have too much credit. Too much credit is a bad sign as well, as it may cause you to lose track on the types of debts you have, how much you owe, and to whom. This can also be another sign that you’ve given up on paying the bills, because you don’t know how much you owe anymore.

You’re afraid to look at your credit report. By being scared to look at your credit report, this could only mean that you know deep inside that you haven’t been really well on your payments lately. This just means that you’re expecting the worst. However, instead of being afraid, you have to face the problem, and this should start by having the courage to view your credit report and see where the problem lies.

You don’t want to open your credit card statements. Same as above, being afraid to open your credit card statements might mean that you are scared to accept the fact that you’ve taken on too much debt already, or worse, you have no more plans on repaying them.

You don’t know what your credit limit is anymore. Not knowing what your credit limit is can only mean two things- first, you have exceeded your limit; and second, you have stopped using your credit altogether. Unfortunately for you, both options can cause damage on your credit score because of two reasons as well. First, your credit utilization, which is the ratio of your balances to your credit limit, would increase the more you keep your balances near the credit limit. Second, if you stop using your credit, there will be no payment histories to be reported to the credit bureaus, which can cause a credit score drop.

Your credit card is the only type of credit that you have. As previously mentioned, part of your credit score is determined by the mix of credits that you have. Whenever you’re applying for a new credit, the lender would like to see that you have experience in both revolving types of loans and installment loans. Thus, aside from credit cards, it pays to have a personal loan, such as a mortgage or payment loan in your credit report.

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