Bad Credit Rating – Is it a Good Thing?
Tuesday, June 2nd, 2009 Subscribe To Our Feed
A bad credit rating save you from larger troubles? Hasn’t it done just that for many young people? I will desribe it with some true stories.
Good Credit Rating Story
My friend started his early years with good credit. Soon he was able to get credit cards at will, as well as finance cars, snowmobiles and more. He made the payments, and went deeper and deeper into debt while he was at it. He had over twenty thousand dollars in credit card debt, plus loans on cars and business tools when he was just 30 years old.
His debt become too much to handle. After considering bankruptcy, he was convinced that the credit card companies would reduce his balance due if he just threatened to declare bankruptcy. However, he had to stop paying on the cards, or the credit card companies wouldn’t believe he was in financial trouble. He did this, and then drafted a nice letter to the companies, explaining his situation. Most of the companies cut thirty percent off what he has to pay, but he had to pay the remaining money immediately, which he did with a home equity loan.
As a result he was able to rebuild his credit score as his bad credit rating was not as bad as if he had actually declared bankruptcy. He also started to rebuild his credit balances. His good credit rating enabled him to again start the process of overloading himself with debt. He lives a stressful life, to say the least.
A Bad Credit Rating Can Be A Good Thing
Another friend had her first credit score based on the phone bill in her first apartment, which she never paid on time. It was ultimately disconnected. This, along with a few other minor credit infractions, destroyed her credit scores while she was young. What has this meant for her?
Just because she cannot take any further money she is not overwhelmed with debt and at the edge of bankruptcy. She has to pay cash for everything or wait until she didn’t save enough to buy it. Has the inability to have a bunch of things around that are worth a fraction of what she owes on them made her less happy? I don’t think so.
She looks happier than rest of the people, perhaps partly because she just doesn’t have the debt-stress that is so typical today.
Bad Credit Rating Can Be A Good Thing?
I’m not saying you should intentionally try to get a bad credit rating, but if you already have one, know that it isn’t all bad. The habits that got you here could get you into even more trouble if you could borrow more. Take it as an opportunity to stop going further into debt, and a chance to learn better habits?
Pay cash for everything. You should pay those credit card and loan balances which is having the higher interest rate. The moment you get your cards paid off, start setting aside money to buy a good used car for cash. then, when you’ve done that, start putting what would have been a car payment into a savings account, for a future down payment on house or a business (the only things you should borrow for). A bad credit can be good if you learn a lesson from it.
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