As adults, we grapple with the complex intricacies of financial matters. Just a slew of jargon and perplexing concepts. Such challenges often evoke nostalgia for our carefree childhoods – those idyllic days untethered by these adult concerns. Yet, here we stand confronted by them, inevitably. As an adult, you must vigilantly monitor a myriad of factors at all times to maintain self-control.

Navigating the credit score remains one of the most complex aspects in personal finance. Undoubtedly, you must have heard about it; when seeking a loan or evaluating your financial well-being, questions about your creditworthiness will be asked. And, this is usually when the credit score.

Many of us can easily manage our credit scores. However, some people have such terrible finances that their credit scores are irreparably damaged. If you fall into this category, stay tuned – this video will explore the reasons behind low credit scores and introduce strategies to restore financial stability with the guidance of a personal finance coach.

What Is Your Credit Score?

Before delving into the heart of our discussion, a cursory understanding of credit scores is essential. We must explore why these numerical evaluations have garnered such significance in daily financial transactions; their impact extends beyond simple numbers – they serve as gatekeepers to opportunities and indicators of fiscal responsibility.

A person’s creditworthiness essentially hinges on their three-digit credit score. Typically, these scores span from 300 to 850; indeed, higher numbers signify superior financial standing – a fact with which you are already familiar.

Everyone has a credit score. The score is based on your credit history, and it factors things like:

• Your history of paying bills and loans on time, as well as the number of late payments you’ve had
• The amount of credit you have, compared to the credit available to you
• The length of your credit history over the years
• Different credit types, which shows your ability to manage various types of credit
• Recent applications for loans and credit

Credit bureaus in the United States often use a complex method that incorporates mathematical and social science principles to compute your ideal credit score. This process involves meticulous addition, averaging, and additional calculations, and there’s a lot of mumbo jumbo in it, too.

Several reasons underscore the importance of credit scores. But, the most important is that a good credit score simplifies securing a loan or another form of financial lifeline.

When you approach a bank or credit institution for a loan, they quickly check your credit score. Anything between 670 to 850 demonstrates your status as an individual with good creditworthiness, and it also increases the likelihood of securing that requested loan from said institution.

That being said, a high credit score in and of itself does not trigger automatic qualification for a loan. However, it significantly improves your chances. Consequently, aiming for an impressively robust credit rating should remain one of your primary financial objectives. This will elevate you as a reliable lending risk – a status worth pursuing with utmost diligence.

Why People Have Bad Credit Scores

Understanding the concept of credit scores, let’s now turn our attention to why individuals often possess terrible ones.

Now, before we proceed, you need to know something – a bad credit score does not inherently signify poor financial management. Indeed, individuals who are fiscally responsible may still succumb to the pitfall of low credit scores. Now then, what factors contribute to this phenomenon?

Delayed repayments:

Easily the most popular reason for people having terrible credit is an abundance of delayed payments on credit card and others. The more the number of delayed payments you have, the worse your credit score becomes.

Missed payments:

Having delayed payments is one thing. But, missing your payments constitutes an entirely different scenario. In most cases, unforeseen emergencies render people unable to fulfill their financial obligations – a medical bill could arise, job loss could occur, anything. But, the result is that you end up missing your payments. And this will result in a record that reflects on your credit score.

Unclear credit history:

Do you want to know an interesting fact? It’s possible for your credit score to also be low if you have never taken out a loan or you have no active credit card account. Consequently, this indicates a scanty credit history on your part; and solely due to that reason alone, financial institutions will approach with caution before granting any monetary assistance. Crazy, right?

Identity theft:

There’s a reason why everyone really talks about being able to protect yourself from identity theft these days. And that’s because if identity thieves get a hold of your financial information, then you’re acutely at risk of getting a hit on your credit score. Who knows what these dastardly thieves can do?

Why A Financial Coach Can Help With This

So picture this – you’re trying to get a loan, and you find out that your credit score is in the absolute gutter. No bank or credit institution wants to touch you, and it feels like you’re pretty much on your own financially.

What can you do to help? Well, if I were to advise you, I’d say you start by getting a personal financial coach.

A financial coach is a person who has been trained to help you identify opportunities to improve your financial standing and manage your money. These guys have the right level of expertise, and they’re perfectly trusted to help look at your finances and help you get in better shape.

Now, remember – a financial coach does not dictate your decisions. Instead, they concentrate on imparting money management skills to enhance your confidence in accomplishing financial goals. If improving your credit score is among those objectives, then consider yourself fortunate, because the expertise of a personal financial coach can significantly help you.

In so many ways, a personal financial coach will assist you. They assess your current financial standing and position, then devise plans of action based on your desired destination. Simultaneously, they aid in structuring debt payments, and this enhances your creditworthiness. Continuing to pay off this debt enhances your image as a reliable credit risk in the eyes of banks and financial institutions.

Before you know it, you’ll be able to move from a credit score in the low three digits to something more presentable.

When it comes to personal financial coaches, you want to keep something in mind – these guys aren’t magicians. A personal financial coach won’t just wave a magic wand and improve your credit score in a day. And to be honest, any financial coach worth their title will be able to tell you that this stuff takes time and consistent effort. What you want to do is build discipline and take your finances one day at a time. And, a financial coach should be able to help you with this.

Soon enough, you’ll be able to show that you’re in a better place financially, and your credit score will reflect it too!

Sources:

https://www.investopedia.com/terms/c/credit_score.asp

https://www.barclaycard.co.uk/personal/money-matters/credit-score-basics/what-are-the-causes-of-a-bad-credit-rating#:~:text=If%20you%20make%20a%20late,easily%20you%20can%20borrow%20money.