Our lives in the 21st century have been the best so far. The people in the past did not even imagine the kind of luxuries we enjoy. From the technological advancements to the quality of life, every aspect has improved tremendously.
Even though the times have changed, and so have the people, there is still one object that holds the same level of importance in everyone’s lives. Can you try to guess? I will give you a hint. This object of significance that is valued everywhere in the world is given a different name everywhere.
This is not because of the different languages that we have, but because it is valued at different levels for each country. Some call it Dinar, some call it Peso and some even call it Rand. Yes, I am talking about money.
Money was necessary for the past, it is vital in the present, and it will be valuable in the future as well. However, the means to acquire this necessity have changed in the present. This change can be attributed to the increased job opportunities since we did not have the likes of fashion bloggers and YouTubers in the 19th century.
Now people have the means to get as much money as they want. Despite this being a positive thing for people, it has had numerous repercussions.
For instance, earlier, if you wished to buy something, you needed to have the funds, and if you did not, your needs would never be entertained. That is not the case today. At present, if you want to buy something that is way out of your budget and you don’t have the money to fund that purchase, worry not.
You can still buy it, through the very accommodating inception of loans. You don’t even need a full-time job, and you don’t have to go out of your homes to get one, doorstep loans for unemployed will come to your home and provide you one.
Loans were created for the convenience of people, to bridge the gap between their desires and income. They were meant to be a blessing, but, tragically, they have become a burden.
Getting a loan could mean that you can get out of your financial puzzle in the present, but for many, it often accompanies a bad omen in the form of bad credit. People do take a loan, but many a time, it becomes difficult for them to repay it. The reasons for the same can be many, but the outcome remains as an unpaid debt with the borrower having a terrible credit score.
Let us shed light upon it through the loan lender’s eyes.
The Lender’s Perspective
For someone who is lending you his money, it is very important to know that you will repay it. This is imperative because a lender’s only income is through the borrower’s repayments, and if he doesn’t pay back the borrowed amount the lender is doomed.
To avoid such a scenario, a credit score comes handy. This is a score that lets the lender know about the borrower’s capability to repay his debt. This score ranges from excellent, fair, average, poor and very poor. It is the last two that are the most disturbing for the borrower as well as the lender.
Now, how does the lender categorise the borrower into these two? There are three primary ways to know so.
Jumping Your Credit Instalments
A loan is always repaid in monthly instalments that provides the lender with a steady income and makes it easy for the borrower to repay the entire sum plus interest.
However, many a time, the borrower is unable to make the instalment on time. If the payment is not made for a month, then his credit score starts to get affected and becomes lower with each unpaid instalment.
Not Paying Your Non-Credit Accounts
The next indication about your credit score is given to the lender through your non-credit expenses and their payments. These are the expenses that are not necessarily a kind of loan, like your phone bills, the heat and electricity payments. If there have been arrears in these payments, it would be reflected in your credit score.
Cancelling Your Credit Card
People take a credit card so that they can buy the things that are out of their budget and make payments later on. However, it is not only default in your credit card payment that can affect your credit score, but also the cancellation for one. It is a red flag for the lenders since it means the card has become a burden for you, so, a loan definitely will be.
This is how the banks and the other lenders analyse your creditworthiness, but you, as a borrower, have a different take on it.
The Real Reasons
Nobody wishes to jump their instalments. Nobody wishes to become a red flag for the lender. Certainly, nobody wants a loan for betterment to turn into a more significant crisis. But these things still happen. The reasons can be many.
Being Stuck In An Ungratifying And Underpaying Job
The competition is at its heights in the present, especially in the job market. Getting a job is the most challenging task in the present. Perhaps that is why people settle on the first one they get and never let it go. This means they are stuck in a job that does not pay what they deserve and is way below they calibre.
Since there is no other option, they have to settle. With more expenses and less income, a loan becomes mandatory, and repayment becomes daunting. Hence, bad credit is a visible result.
Mismanagement Of Finances
Personal finance is an area people do not take seriously enough. It does not just mean getting money, but it also teaches the proper utilisation of funds. Budgeting is the paramount function of personal finance. Since people neglect it, they do not know how much to expend and how much to save?
This is another reason for bad credit because they take loans that were not needed in the first place, drain that money and paying it back becomes challenging as they never manage their finances.
Desiring Too Much
Today, everything that you can imagine to want is available in the market. Every year thousands of new products are launched to tempt the buyer in making the purchase. So evidently, he starts desiring too much.
Along with this the lenders also don’t hold back, loans like installment loans for bad credit become the last straw in the buyers’ will, and he makes the purchase and envelopes himself in the viciousness of bad credit even more.
If the borrower wishes not to be a victim of bad credit, he needs to introspect and find out how many of these reasons does he have in his profile and how must he work to improve them? Being in bad credit, all your life is not an option.
Even if you may not wish to take on a loan in the coming future, you may have to take one in distant times. And with a tag of bad credit, your chances of getting one would be very slim.