How To Survive & Thrive With Bad CreditBad credit isn't the end of the world. Millions of Americans are surviving and thriving despite having very low credit scores! They have homes, cars, jobs, appliances and almost everything else a modern family could want. That doesn't mean a good score isn't important, and it doesn't mean that you shouldn't try to improve your credit. It does mean that you don't have to put your life on hold while you do it.
Sometimes, poor credit is almost unavoidable. If you've been unemployed for a long time or have experienced a medical emergency that hit you hard financially, falling behind on your bills can be inescapable.
Here are five helpful tips for living with bad credit:
Finding a Job - Applying for jobs is stressful at any time, but knowing that some potential employers carry out credit checks as part of the application process can make it even worse. This reality can leave people with poor credit feeling uncertain even before they've had an interview.
Fortunately, fewer employers today conduct these checks as part of the application process. Among those that do, many go on to employ individuals with negative marks on their reports.
The key is to be prepared ahead of any job application and be willing to discuss any black marks that may be on your report. You could even consider taking a copy of your credit report with you to interviews. Showing that you understand your credit history and you're actively working to improve it will make a positive impression.
Renting an Apartment or House - Even with poor credit, renting an apartment or house isn't out of the question. Many landlords will carry out credit checks on you as part of your application, but a bad rating won't necessarily ruin your chances of being successful. If you can show a steady income and provide written recommendations from previous landlords, employers, and your bank, a landlord may be happy.
You may just need to pay a higher security deposit in advance or have someone you know co-sign your lease. Guarantors and co-signers go a long way when you're looking to rent, but just make sure you both understand the consequences should you find yourself in a position where you can't pay your rent. For more information see guide to renting with bad credit.
Getting a Mortgage - People with bad credit often assume that a mortgage is totally out of the question. It's not, but you should be prepared to jump through hoops to obtain one and to pay a higher interest rate than someone with a better credit score would.
Mortgage providers are wary of people with bad credit. You can still talk to subprime mortgage lenders that specialize in helping people that can't get a traditional home loan. How high an interest rate you secure will depend on how bad your credit history is and how much of a risk you represent to the mortgage provider. Just remember that subprime mortgages are nearly always adjustable, so a seemingly low initial rate could increase significantly in the future.
Other mortgage options when you have bad credit include FHA Home Loans, VA Home Loans, and USDA Home Loans. You can find out more about each of these in our Bad Credit Home Loans article.
Buying a Car - Cars are a simple necessity of life for most people, and having poor credit shouldn't prevent you from owning one.
If you can afford to buy a second-hand car privately, then do that. It won't affect your credit score and burden you with a long-term financial commitment. If you can't, then be prepared to shop around and get the very best financing deal you can.
Try negotiating with credit unions and car finance companies by offering to put down a large initial payment if you can. The down payment indicates your seriousness and willingness to commit to the financial agreement.
Your bank is often a great place to start trying to secure a loan to finance the purchase of a car. They know more about you than a car finance company, and you can go to the car dealership knowing that you've already been pre-approved, which can help you get an even better deal. Be wary of lenders that stuff loan agreements with tons of extras, many of which you probably won't need.
Click here for more on buying a car with bad credit.
Purchasing Home Appliances- A broken stove or washing machine can be a nightmare, especially when you don't have any money saved to buy a new one. Did you know that many companies selling home appliances offer 0% interest for up to 24 months? That applies even to people with bad credit or no credit. These deals allow you enough breathing space to save a little money and pay off your balance when it's due. Just make sure you do pay the balance off, or your credit history could take even more of a hit.
Another option is to get a secured credit card, which is one of the most effective ways to keep yourself in the credit economy and to begin restoring your credit score. You'll have to pay a deposit, and your initial credit limit will be modest, but secured cards can be useful tools for managing day-to-day purchases and getting your score back on track. Just remember to keep your spending at 30% of your limit or less, and to pay those bills on time!
The Bottom LineBad credit is not the end of the world. You can get by, but you will have to be aware of the impact your credit score has, and you'll spend a lot of time and effort developing strategies to work around that impact. It's great to have short-term strategies to survive with bad credit, but the long-term goal should always be to rebuild that credit score to a point where you no longer need to hustle to find ways around it!