Building a good credit standing is hard work. Destroying it, however, can be quick and easy. Considering that it dictates how your financial life will fare, you should strive to maintain good, if not excellent, credit standing. How do you do this exactly?
Paying late not only incurs penalty charges and an increase in interest, it can also hurt your credit score. As it happens, 35% of your credit score is based on how good or bad you are at repayments. Any bank or lender would think twice about lending you money if they see your repayment behavior.
Between paying late and not paying at all, you’ll fare better with late payments, because you still have a chance to repair your credit score. If you don’t pay at all, your account might be charged-off, which is the worse thing that can happen to your credit standing. This basically tells lenders that you have been delinquent in your liabilities. The charge-off account status will remain on your credit report for seven years, lowering your chances of getting financial support when you need it.
Doing so is similar to a charge-off, but worse. Loan defaults mean you didn’t fulfill your end of the bargain that you agreed on with the bank or lender. This clearly shows you can’t be trusted to pay off whatever amount you borrowed. One look at the default status on your credit report and lenders will go running to the opposite direction.
Ever wondered why financial experts often advice against filing bankruptcy. This is because it will hurt your credit score in the worse way possible. This is why you should seek alternatives before you hammer the last nail on your coffin. Undergo consumer credit counseling or something similar.