Adverse Credit: Causes, Consequences, and Solutions

Adverse credit can have a significant impact on your financial life. It can limit your access to credit, increase your interest rates, and make it difficult to rent a home or obtain insurance. However, there are steps you can take to improve your credit and get your finances back on track.

What is Adverse Credit?

Adverse credit is a term used to describe a credit history that includes missed or late payments, defaulted loans or credit cards, bankruptcy, foreclosure, judgments or liens, high credit utilisation, lack of credit history, or identity theft. Adverse credit can have a negative impact on your credit score, which is a numerical representation of your creditworthiness.

Common Causes of Adverse Credit

There are several reasons why someone might have adverse credit. One of the most common causes is missed or late payments. When you miss a payment or pay late, it can stay on your credit report for up to seven years and have a negative impact on your credit score.

Defaulted loans or credit cards can also lead to adverse credit. When you default on a loan or credit card, it means you failed to make the required payments, and the account was sent to collections or charged off. Defaulted accounts can stay on your credit report for up to seven years and have a significant impact on your credit score.

Bankruptcy and foreclosure are two other causes of adverse credit. Both bankruptcy and foreclosure can stay on your credit report for up to ten years and have a severe negative impact on your credit score.

Consequences of Adverse Credit

Adverse credit can have several consequences. One of the most significant consequences is difficulty obtaining credit. When you have adverse credit, lenders may be hesitant to approve you for a loan or credit card. If you are approved, you may be subject to higher interest rates.

Adverse credit can also limit your access to financial products and services. For example, if you have adverse credit, you may have difficulty renting a home or obtaining insurance. You may also be subject to higher deposits or fees.

How to Improve Adverse Credit

Improving adverse credit takes time and effort, but it is possible. The first step is to obtain a copy of your credit report. You can obtain a free copy of your credit report from each of the three major credit bureaus once a year.

Once you have your credit report, review it carefully for errors. If you find any errors, dispute them with the credit bureau. Disputing errors on your credit report can help improve your credit score.

Creating a plan to pay off debts is another essential step in improving adverse credit. Make a list of all your debts and create a plan to pay them off. Consider prioritising debts with the highest interest rates first.

Making payments on time and in full is critical to improving adverse credit. Set up automatic payments or reminders to ensure you never miss a payment. Keeping credit card balances low and using credit responsibly can also help improve your credit score.

Building a positive credit history is another essential step in improving adverse credit. Consider opening a secured credit card or becoming an authorised user on someone else's credit card to start building credit.

Our Adverse Credit Services

If you need help improving adverse credit, our services can help. We offer a range of services designed to help you improve your credit score, including credit counselling, debt management, and credit repair. Our experienced professionals can help you develop a plan to improve your credit and get your finances back on track.

Conclusion

Adverse credit can have a significant impact on your financial life, but it is not insurmountable. By taking the steps outlined in this article, you can improve your credit score and regain control of your finances. If you need help, don't hesitate to contact us for assistance