Many people grow up never learning or understanding the value of money. Their parents don’t teach them because they were never taught either. This can cause a lot of problems for them and in some cases ruin their lives. How does this happen?
Those who are financially illiterate spend money without a thought. They spend and spend on mindless things they don’t need without thinking about the consequences. This usually leads to credit cards. When shopaholics get their hands on a credit card, bad things happen. They charge everything to it and only pay the minimum payment. This leads to interest and all the debt begins to pile up. Soon they are unable to even make the minimum payment. This can lead to thousands of dollars in debt and possibly bankruptcy.
Whether you are in this position or a much less severe version, it will lead to a bad credit history. You probably hear all the time how awful it is to have bad credit. Unfortunately, no one is going to tell you otherwise. Bad credit is bad. Not paying money back on time when you promised you would is wrong, and rarely do wrong deeds go unpunished.
You don’t get a slap on the wrist when you miss a payment, but it is likely to affect you poorly in the future. If you have bad credit history and a bad credit score, the next time you go to apply for a loan, it will be very hard if not, impossible. Lenders will not lend you money if you have very bad credit, and if they do, you will be charged a very high interest rate.
When someone decides to lend you money, they are taking a risk. They can never know for sure that you will pay it back. This is why they look at credit. If you have absolutely no credit, you probably won’t be able to get a big loan such as a mortgage without a cosigner. A cosigner is someone who has excellent credit who signs the loan as well. If you don’t pay the loan back, they will be charged. They have to pay it if they want to maintain their good credit. This is why it’s hard to find a cosigner. If you are good with your money and you don’t have credit because you are still young, if your parents trust you, they might cosign for you.
If you are having trouble paying your bills and you don’t want to hurt your credit, you need to take action to ensure you always pay everything. Make a budget and cut back on your expenses. If it is really bad, move into a smaller living space that costs less or move back in with your parents if you have to. Bad credit and heavy debt is not where you want to be. You have to correct it now in order to ensure a bright future.