Reduction of spending power
Several times a year credit card companies review the credit reports, of their customers. Risk-assessments are performed. Sometimes that results in a lowered credit limit.
Credit applications declined
When applying for a new loan with bad credit, the consumer may find the traditional sources of credit to be unwilling to lend money. Even if the income of the applicant is sufficient, that bad credit score indicates a larger risk to the lending company.
Involuntary account closures
Sometimes a credit card company, upon learning of the reduced credit score of a cardholder will close the cardholder’s account – even if that account is being kept current or has a zero balance.
Negatively affect social relationships
A bad credit score can affect social relationships. Some twenty and thirty-something single professionals ask their dates what their credit score is before determining whether or not to ask for another date!
Reduced employment opportunities
Some employers check the credit scores of their job applicants. Companies such as banks, armored security trucks, or casinos do not want to hire employees that are experiencing financial difficulty.
Larger security deposit requirements on rental housing
When a consumer with a bad credit score applies to rent a home, the landlord may require a larger security deposit. The landlord will justify that requirement based on the concern that the tenant may fall behind on rental payments and fear that the landlord may have to go through the expense and trouble of a lengthy eviction process.
How to mend a bad credit score
Sometimes a bad credit score results because of an error in the credit report. That can be remedied by obtaining a copy of the credit score to check on the accuracy. If there are errors, writing to the credit company to inform them of the error will remedy that problem. If there are no errors, making a budget and sticking to it, making sure that payments are made on time are the best ways to improve a bad credit score.
Some consumers have had so much bad luck in recent years that their credit score has fallen through no fault of their own. Loss of income, for whatever reason can devastate a family and their credit score. These consumers may need to look into bankruptcy if they have exhausted all of their resources.
Bankruptcy may actually be a way to improve a bad credit score
Declaring bankruptcy may actually be a viable path to improving a bad credit score. Once a bankruptcy court approves the bankruptcy, all of the overdue payments, all of the records of high balances and unpaid debts are wiped clean and removed from the credit score of the consumer. There are different types of bankruptcy with different rules and regulations. A good bankruptcy attorney will review the debts, assets, and needs of the client to determine if filing for bankruptcy will give the debtor a fresh start, or if a different tactic, such as debt negotiation is in order.