Can you have a zero credit score? What to know about bad credit and how to fix it
When you’ve got a lot of debt, it is stressful to stay afloat and make your credit payments every month. It is even more stressful when you consider how your money management today could negatively influence your financial future. You can reduce that stress by understanding what will impact your credit history (and credit score).
“Having a good credit score isn’t just about you being able to qualify for more credit down the road. It could impact your living arrangement or employment. Your landlord and possibly even your employer might ask to see your credit score. Having poor credit can be costly for you as well. Having lower credit means that you’ll usually be subject to higher interest rates. There are many reasons to be proactive in trying to manage your credit health,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
Have you fallen behind in your debt payments? Are you turning to debt just so you can pay other expenses, including making debt payments? It’s time to stop the debt cycle from turning. Call one of our trained credit counsellors at. We can help you pay your debt down for good. Call us at 1-888-294-3130 or get started with our free online debt analysis .
The more you know about your credit score, the more in control of your financial future you will be. It can help to know about the range of credit scores, what they mean and how your actions impact them.
What is a bad credit score?
Let’s set some facts straight about credit scores. You can’t have a zero credit score. But, you can have negative credit, but the number assigned to your credit score cannot be less than zero. You don’t start out at zero and work your way up.
Credit scores range from 300 at the very low end all the way up to 900 for stellar credit. In most cases, you need at least 575-650 to qualify for traditional credit products.
A number of different factors, with varying influence, make up your credit score. Your payment history comprises the largest portion of your score. The later your payments are (and the more often they are late) the lower your credit score is. Other factors include high balance on credit cards (near or at the limit), length of credit history and whether or not you’ve got experience with different credit products (i.e. installment and revolving credit) because each involves different budgeting.
If you have a number of inquiries from lenders on your credit report, that will pull your score down in a hurry too, because it looks as though you’ve been turned down for credit multiple times and have tried to re-apply frequently.
If any of these apply to you, you may have a lower credit score. The good news is that the problems causing you to have bad credit are also the solutions, once you address where you’ve made your credit mistakes.
What can cause your credit score to drop quickly
It doesn’t take much to drop your credit score, especially if you are late on your payments. Depending on what the blemish on your credit history is, the note can stay on there for up to 7 years.
There are certain activities that will cause your credit score to drop more quickly, in addition to the other factors we’ve mentioned above (i.e. late payments, high balance cards, etc.). If your debts have gone to collection, have tax liens against you/your property, if you have declared bankruptcy or have other debt settlements, your score will decline rapidly and have a longer lasting impact than other factors.
How long does it take late payments to show up on my report?
Usually, if you are late on a payment, it will show up within 30 days of the end of the last billing cycle. Most major lenders and creditors report to the credit bureaus once a month, so depending on where their reporting date is in relation to your billing cycle, you will usually see a notation for bad credit within 30-45 days of a late payment. Each 30-day cycle that the debt remains unpaid will hurt your credit further. Typically, once your debt has been unpaid for 180 days consecutively, your debt will be turned over to collections.
How to improve your credit
Just because you have bad credit right now doesn’t mean that it has to stay that way. You can develop a planned rebuild. Realize that it is going to take time and a consistent effort.
Make a point of making payments on time each and every month. Be proactive and mark in your calendar when payments are due so that you are prepared to pay on time. Work at paying down your debt so that your cards aren’t maxed out.
If you qualify, think about taking out a consolidation loan that will help you pay your debt down more quickly and improve your credit score by diversifying your credit. If your problem is a lack of credit history, open a small balance secured credit card and make payments on time every month.
As you pay down your debt, don’t necessarily cancel all of your cards. Keep one or two open in order to maintain the length of your credit history. Interest rates should be the main factor, but consider keeping one or two cards open that you’ve had for the longest.
“Make sure that you plan ahead on how to use credit after you’ve paid the balances down, to ensure that you don’t run into debt trouble again while rebuilding your credit,” says Schwartz.
You can improve your life and your credit score by paying down your debt. Our trained credit counsellors can advise you on how to pay down your debt and how to rebuild your credit at the same time. For more information, call us at 1-888-294-3130 or get started with our free online debt analysis .