Bad Credit Rating - A Good Thing?
Sunday, May 31st, 2009 Subscribe To Our Feed
Can a bad credit rating save you from bigger problems? Hasn’t it done just that for many young people? I’ll explain how with a couple true stories.
Is It Good To Have A Good Credit Rating
My friend started his adult 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. When he was 30 years old, he had over $20,000 in credit card debt, plus loans on cars and business tools.
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. After doing this, he drafted a nice letter to the companies, explaining his condition. Most cut at least 30% off what he owed, but he had to pay the remaining balances immediately, which he did with a home equity loan.
As a result, his bad credit rating wasn’t as bad as if he had actually declared bankruptcy, so he was able to rebuild his credit score. He also started to rebuild his credit balances. His good credit rating enabled him to begin again the process of overburdening himself with debt. He lives a stressful life, to say the least.
Story Of A Bad credit Rating
My another friend has a bad crediit score as she never pay her phone bill on time. It was eventually disconnected. While she was young this and some other minor credit infractions, destroyed her credit scores. What effect did it had on her?
Because of bad credit rating she was saved from the painful stress of paying debt. She has to buy things for cash when she has it, or wait until she saves enough. 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 seems happier than most people, perhaps partly because she just doesn’t have the debt-stress that is so typical today.
Bad Credit Is Good?
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. Your borrowing habits can trap you into more serious debt problems. Why not look at it as an opportunity to stop going further into debt, and a chance to learn better habits?
Buy everything from cash. 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). Your bad credit rating can be a good thing if you take it as a chance and learn a lesson from it.
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