Bad or poor credit is often largely considered to be a result of financial irresponsibility. This assumption is not always true. For some people, bad credit is a result of overwhelming circumstance and sheer bad luck. According to the credit reporting agencies however, there is no distinction. To these agencies, an individual whose house goes into foreclosure due to loss of a job or one who is hospitalized and defaults a few months’ payments is treated the same way as one who simply stops paying the mortgage payments because he doesn’t wish to do so. Well, bad credit also has quite a lot to do with financial literacy, inadequate planning as well as high debt. Whereas anyone with a bad credit report can quickly dismiss the possibility of accessing a mortgage, there are a couple of lenders that readily offer bad credit mortgages. Whichever way you look at it, bad credit mortgages are always a vicious circle that could prove quite difficult to break.
Bad credit attracts substantially higher payments on a borrower’s home or vehicle than good credit would do. Borrowers may be struggling financially to settle debts which would ultimately lead them into bad credit. This will subsequently lead to higher rates as well as higher payments for future debts. This is in turn followed by more financial woes as time advances which eventually becomes full circle.
Bad credit can as well get really bad, even costing an individual job opportunities. Statistics indicate that 25 to 60 per cent of employers check job candidates’ credit files. Bad credit can therefore deter a candidate from securing employment for which they are qualified.
One’s credit report can determine whether he pays heavy deposits or signs up without whatever form of collateral when opening electricity or water accounts. Bad credit scores may mean hefty deposits while swapping satellite dish or cable service providers. Businessmen often view individuals with bad credit scores as risky to do business with. Such business owners take precautions to protect themselves oblivious of the adverse financial effects the measures they put in place may have on certain consumers.
Besides all these costs, bad credit may result into payment of higher insurance premium rates. Insurance is usually generally concerned with protection of subscribers in the event of adversity. Apparently, people with poor credit score are always likely to file an insurance claim, hence a great correlation between insurance and bad credit. This works similarly to the age and gender considerations made by insurers. In states where it is allowed, (all states except California, Maryland and Massachusetts) statistics show that about 85 per cent of home owning companies use credit to arrive at insurance premiums – premiums nearly double for those with poor or bad credit and their rates may increase by 91 per cent on average.
Nevertheless, all hope is not lost for anyone with bad or poor credit record. The bad credit mortgages vicious circle of economic detriment can be broken by reducing the number of times adverse mortgage information appears on the credit report to under three years. The affected person can also prohibit landlords, insurers and employers from considering credit reports. Borrowers with bad credit can rectify their credit record by clearing their debt and ensuring all future debts are cleared on time.
Borrowers with lower credit scores can use the Federal Housing Administration’s loan program which insures lenders against potential default. If a borrower's bad credit is a result of personal hardship rather than irresponsibility and mismanagement then they qualify for a FHA loan. Borrowers can still access bad credit mortgages through subprime lenders.
For more information refer to MortgageCWF one of the leading bad credit mortgages providers in Toronto, Ontario, Canada.
